Structure of Indian Money Market - Chart

The entire money market in India can be divided into two parts. They are organised
money market and the unorganized money market. The unorganised money market can
also be known as an unauthorized money market. Both of these components comprise
several constituents. The following chart will help you in understanding the
organisational structure of the Indian money market.
Components, SubMarkets of Indian Money Market
After studying above organisational chart of the Indian money market it is necessary to
understand various components or sub markets within it. They are explained below.
1. Call Money Market It an important sub market of the Indian money market. It
is also known as money at call and money at short notice. It is also called inter
bank loan market. In this market money is demanded for extremely short period.
The duration of such transactions is from few hours to 1! days. It is basically
located in the industrial and commercial locations such as "umbai# $elhi#
%alcutta# etc. These transactions help stock brokers and dealers to fulfill their
financial re&uirements. The rate at which money is made available is called as a
call rate. Thus rate is fixed by the market forces such as the demand for and
supply of money.
'. Commercial Bill Market It is a market for the short term# self li&uidating and
negotiable money market instrument. %ommercial bills are used to finance the
movement and storage of agriculture and industrial goods in domestic and foreign
markets. The commercial bill market in India is still underdeveloped.
(. Treasury Bill Market This is a market for sale and purchase of short term
government securities. These securities are called as Treasury Bills which are
promissory notes or financial bills issued by the )BI on behalf of the *overnment
of India. There are two types of treasury bills. +i, -rdinary or )egular Treasury
Bills and +ii, Ad .oc Treasury Bills. The maturity period of these securities range
from as low as 1! days to as high as (/! days. They have become very popular
recently due to high level of safety involved in them.
!. Market for Certificate of Deposits (CDs It is again an important segment of
the Indian money market. The certificate of deposits is issued by the commercial
banks. They are worth the value of )s. '0 lakh and in multiple of )s. '0 lakh. The
minimum subscription of %$ should be worth )s. 1 %rore. The maturity period of
%$ is as low as ( months and as high as 1 year. These are the transferable
investment instrument in a money market. The government initiated a market of
%$s in order to widen the range of instruments in the money market and to
provide a higher flexibility to investors for investing their short term money.
0. Market for Commercial !apers (C!s It is the market where the commercial
papers are traded. %ommercial paper +%1, is an investment instrument which can
be issued by a listed company having working capital more than or e&ual to )s. 0
cr. The %1s can be issued in multiples of )s. '0 lakhs. .owever the minimum
subscription should at least be )s. 1 cr. The maturity period for the %1 is
minimum of ( months and maximum / months. This was introcuced by the
government in 1223.
/. Short Term "oan Market It is a market where the short term loan re&uirements
of corporates are met by the %ommercial banks. Banks provide short term loans to
corporates in the form of cash credit or in the form of overdraft. %ash credit is
given to industrialists and overdraft is given to businessmen.
4tructure of Indian %apital "arket with $iagram
Broadly speaking the capital market is classified in to two categories. They are the
1rimary market +5ew Issues "arket, and the 4econdary market +-ld +6xisting, Issues
"arket,. This classification is done on the basis of the nature of the instrument brought in
the market. .owever on the basis of the types of institutions involved in capital market# it
can be classified into various categories such as the *overnment 4ecurities market or
*ilt7edged market# Industrial 4ecurities market# $evelopment 8inancial Institutions
+$8Is, and 8inancial intermediaries. All of these components have specific features to
mention. The structure of the Indian capital market has its distinct features. These
different segments of the capital market help to develop the institution of capital market
in many dimensions. The primary market helps to raise fresh capital in the market. In the
secondary market# the buying and selling +trading, of capital market instruments takes
place. The following chart will help us in understanding the organizational structure of
the Indian %apital market.
1. #o$ernment Securities Market This is also known as the *ilt7edged market.
This refers to the market for government and semi7government securities backed
by the )eserve Bank of India +)BI,.
'. Industrial Securities Market This is a market for industrial securities i.e.
market for shares and debentures of the existing and new corporate firms. Buying
and selling of such instruments take place in this market. This market is further
classified into two types such as the 5ew Issues "arket +1rimary, and the -ld
+6xisting, Issues "arket +secondary,. In primary market fresh capital is raised by
companies by issuing new shares# bonds# units of mutual funds and debentures.
.owever in the secondary market already existing i.e old shares and debentures
are traded. This trading takes place through the registered stock exchanges. In
India we have three prominent stock exchanges. They are the Bombay 4tock
6xchange +B46,# the 5ational 4tock 6xchange +546, and -ver The %ounter
6xchange of India +-T%6I,.
(. De$elopment %inancial Institutions (D%Is This is yet another important
segment of Indian capital market. This comprises various financial institutions.
These can be special purpose institutions like I8%I# I%I%I# 48%s# I$BI# IIBI# 9TI#
etc. These financial institutions provide long term finance for those purposes for
which they are set up.
!. %inancial Intermediaries The fourth important segment of the Indian capital
market is the financial intermediaries. This comprises various merchant banking
institutions# mutual funds# leasing finance companies# venture capital companies
and other financial institutions.
These are important institutions and segments in the Indian capital market.
46BI )egulates Indian %apital "arket
8or the smooth functioning of the capital market a proper coordination among above
organizations and segments is a prere&uisite. In order to regulate# promote and direct the
progress of the Indian %apital "arket# the government has set up :4ecurities and
6xchange Board of India: +46BI,. 46BI is the supreme authority governing and
regulating the %apital "arket of India