A money market is a place where banks and other financial institutions trade in short-term debt securities such as commercial paper (CP), certificate of deposits (CDs), treasury bills (TBs), and repo in ready-forward contracts (of dated securities, and Treasury Bills). The money market provides a platform for financial institutions to borrow and lend money for a short term of up to one year. Liberalisation measures in the money market preceded the overall reform process as steps related to the deregulation of interest rates and introduction of Commercial Paper and Certificate of Deposit, the exemption of inter-bank lending from reserve requirement, the introduction of screen-based trading and rupee derivatives such as Interest Rate Swaps (IRS) and Forward Rate Agreements (FRA), enlarging the scope of Repo market. Besides, reforms also lent stability to the market as volatility in the call market was reduced by nearly half in the current decade from levels prevailing in the nineties. For example, daily average volumes in the call market got almost half in 2008-09 from Rs. 23,000 crore in 1999-00 to a little over Rs 9,000 crore at present. Whereas, between April and November 2023, the daily average value of market repos was ₹1.46 lakh crore, the highest on record, and 15% higher than the average for 2022-23, according to the latest data published by the Clearing Corporation of India (CCIL). Volumes in other market segments such as CP and CD rose as well. Money market mutual funds (MMMFs) are mutual funds that exclusively invest in short-term debt instruments, cash, and cash equivalents that are rated high quality. It is for this reason that money market mutual funds are considered safe investments with minimal to low risk. As these funds invest in high-quality instruments, they offer a predictable risk-free return rate.
The transformations of the following financial markets have created a robust ecosystem for financial transformation in India.Read:
Transformation of the banking sector in India
Transformation of the Money market in India
Transformation of Government securities market
Transformation of the Foreign exchange market in India
Transformation of the Capital market in India
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