Indian Coin Marketplace Rank - Features, Drawbacks As Well As Recent Reforms

Indian Money Market - Features

Every money is unique inwards nature. The money market inwards developed together with developing countries differ markedly from each other inwards many senses. Indian coin market is non an exception for this. Though it is non a developed coin market, it is a leading coin marketplace position amid the developing countries.

Indian Money Market has the next major features or characteristics :-

1. Dichotomic Structure : It is a important appear of the Indian coin market. It has a simultaneous existence of both the organized coin marketplace position equally good equally unorganised coin markets. The organized coin marketplace position consists of RBI, all scheduled commercial banks together with other recognized fiscal institutions. However, the unorganized component of the coin marketplace position comprises domestic coin lenders, indigenous bankers, trader, etc. The organized coin marketplace position is inwards amount command of the RBI. However, unorganized coin marketplace position remains exterior the RBI control. Thus both the organized together with unorganized coin marketplace position exists simultaneously.
2. Seasonality : The need for coin inwards Indian coin marketplace position is of a seasonal nature. Bharat beingness an agriculture predominant economy, the need for coin is generated from the agricultural operations. During the busy flavor i.e. betwixt Oct together with Apr to a greater extent than agricultural activities takes house leading to a higher need for money.
3. Multiplicity of Interest Rates : In Indian coin market, nosotros get got many levels of involvement rates. They differ from banking concern to banking concern from menses to menses together with fifty-fifty from borrower to borrower. Again inwards both organized together with unorganized segment the involvement rates differs. Thus in that location is an existence of many rates of involvement inwards the Indian coin market.
4. Lack of Organized Bill Market : In the Indian coin market, the organized mouth marketplace position is non prevalent. Though the RBI tried to innovate the Bill Market Scheme (1952) together with so New Bill Market Scheme inwards 1970, yet in that location is no properly organized mouth marketplace position inwards India.
5. Absence of Integration : This is a real of import characteristic of the Indian coin market. At the same fourth dimension it is divided amid several segments or sections which are loosely connected amongst each other. There is a lack of coordination amid these dissimilar components of the coin market. RBI has amount command over the components inwards the organized segment but it cannot command the components inwards the unorganized segment.
6. High Volatility inwards Call Money Market : The telephone phone coin marketplace position is a marketplace position for real curt term money. Here coin is demanded at the telephone phone rate. Basically the need for telephone phone coin comes from the commercial banks. Institutions such equally the GIC, LIC, etc endure huge fluctuations together with so it has remained highly volatile.
7. Limited Instruments : It is inwards fact a defect of the Indian coin market. In our coin marketplace position the furnish of diverse instruments such equally the Treasury Bills, Commercial Bills, Certificate of Deposits, Commercial Papers, etc. is real limited. In companionship to come across the varied requirements of borrowers together with lenders, It is necessary to prepare numerous instruments.

Drawbacks of Indian Money Market

Though the Indian coin marketplace position is considered equally the advanced coin marketplace position amid developing countries, it yet suffers from many drawbacks or defects. These defects boundary the efficiency of our market.

Some of the of import defects or drawbacks of Indian coin marketplace position are :-

1. Absence of Integration : The Indian coin marketplace position is broadly divided into the Organized together with Unorganized Sectors. The erstwhile comprises the legal fiscal institutions backed yesteryear the RBI. The unorganized controversy of it includes diverse institutions such equally indigenous bankers, hamlet coin lenders, traders, etc. There is lack of proper integration betwixt these 2 segments.
2. Multiple charge per unit of measurement of interest : In the Indian coin market, specially the banks, in that location exists besides many rates of interests. These rates vary for lending, borrowing, authorities activities, etc. Many rates of interests practise confusion amid the investors.
3. Insufficient Funds or Resources : The Indian economic scheme amongst its seasonal construction faces frequent shortage of fiscal recourse. Lower income, lower savings, together with lack of banking habits amid people are unopen to of the reasons for it.
4. Shortage of Investment Instruments : In the Indian coin market, diverse investment instruments such equally Treasury Bills, Commercial Bills, Certificate of Deposits, Commercial Papers, etc. are used. But taking into line of piece of work organisation human relationship the size of the population together with marketplace position these instruments are inadequate.
5. Shortage of Commercial Bill : In India, equally many banks maintain large funds for liquidity purpose, the utilisation of the commercial bills is real limited. Similarly since a large pose out of transactions are preferred inwards the cash shape the orbit for commercial bills are limited.
6. Lack of Organized Banking System : In Bharat fifty-fifty through nosotros get got a large network of commercial banks, yet the banking organisation suffers from major weaknesses such equally the NPA, huge losses, piteous efficiency. The absence of the organized banking organisation is major work for Indian coin market.
7. Less pose out of Dealers : There are piteous pose out of dealers inwards the short-term assets who tin human activity equally mediators betwixt the authorities together with the banking system. The less pose out of dealers leads tc the irksome contact betwixt the halt lender together with halt borrowers.

These are unopen to of the major drawbacks of the Indian coin market; many of these are also the features of our coin market.

Recent Reforms inwards Indian Money Market

Indian Government appointed a commission nether the chairmanship of Sukhamoy Chakravarty inwards 1984 to review the Indian monetary system. Later, Narayanan Vaghul working grouping together with Narasimham Committee was also laid up. As per the recommendations of these study groups together with amongst the fiscal sector reforms initiated inwards the early on 1990s, the authorities has adopted next major reforms inwards the Indian coin market.

Reforms made inwards the Indian Money Market are:-

1. Deregulation of the Interest Rate : In recent menses the authorities has adopted an involvement charge per unit of measurement policy of liberal nature. It lifted the ceiling rates of the telephone phone coin market, short-term deposits, bills re-discounting, etc. Commercial banks are advised to reckon the involvement charge per unit of measurement alter that takes house inside the limit. There was a farther deregulation of involvement rates during the economical reforms. Currently involvement rates are determined yesteryear the working of marketplace position forces except for a few regulations.
2. Money Market Mutual Fund (MMMFs) : In companionship to provide additional short-term investment revenue, the RBI encouraged together with established the Money Market Mutual Funds (MMMFs) inwards Apr 1992. MMMFs are allowed to sell units to corporate together with individuals. The upper boundary of 50 crore investments has also been lifted. Financial institutions such equally the IDBI together with the UTI get got gear upwards such funds.
3. Establishment of the DFI : The Discount together with Finance House of Bharat (DFHI) was gear upwards inwards Apr 1988 to impart liquidity inwards the coin market. It was gear upwards jointly yesteryear the RBI, Public sector Banks together with Financial Institutions. DFHI has played an of import role inwards stabilizing the Indian coin market.
4. Liquidity Adjustment Facility (LAF) : Through the LAF, the RBI remains inwards the coin marketplace position on a proceed footing through the repo transaction. LAF adjusts liquidity inwards the marketplace position through absorption together with or injection of fiscal resources.
5. Electronic Transactions : In companionship to impart transparency together with efficiency inwards the coin marketplace position transaction the electronic dealing organisation has been started. It covers all deals inwards the coin market. Similarly it is useful for the RBI to watchdog the coin market.
6. Establishment of the CCIL : The Clearing Corporation of Bharat express (CCIL) was gear upwards inwards Apr 2001. The CCIL clears all transactions inwards authorities securities, together with placidity reported on the Negotiated Dealing System.
7. Development of New Market Instruments : The authorities has consistently tried to innovate novel short-term investment instruments. Examples: Treasury Bills of diverse duration, Commercial papers, Certificates of Deposits, MMMFs, etc. get got been introduced inwards the Indian Money Market.

These are major reforms undertaken inwards the coin marketplace position inwards India. Apart from these, the postage duty reforms, floating charge per unit of measurement bonds, etc. are another prominent reforms inwards the coin marketplace position inwards India. Thus, at the halt nosotros tin conclude that the Indian coin marketplace position is developing at a skillful speed.