123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Stock-Market-Future-Market-Commodity-Market >> View Article

Money Markets

Profile Picture
By Author: Anthony Green
Total Articles: 36
Comment this article
Facebook ShareTwitter ShareGoogle+ ShareTwitter Share

The thrust of monetary policy in recent years has been to develop an array of instruments to transmit liquidity and interest rate signals to the short-term money market in a flexible manner. The objective is to develop a liquid short-term rupee yield curve to enable efficient price discovery and to improve the operational effectiveness of monetary policy.

Over the medium term, it is expected that the call/notice money market would evolve into a pure inter-bank market where participants would meet short-term liquidity mismatches and not undertake regular financing operations. With the rationalisation of the standing liquidity facilities, the Liquidity Adjustment Facility (LAF) has emerged as the prime instrument for managing market liquidity and for setting a corridor for the movement of the short-term rates consistent with policy objectives.

From May 2001, the Reserve Bank shifted to the system of multiple price auctions for repos and reverse repos conducted under LAF. Simultaneously, attempts are being made to develop the term money market, repo and other money market instruments for more balanced growth of ...
... various segments of money market.

The daily minimum reserve maintenance requirement of banks was relaxed from 65 per cent of required reserves for the reporting fortnight (excluding reporting Friday) to 50 per cent for the first week while keeping it at 65 per cent for the second week of the reporting fortnight (including reporting Friday), effective from the fortnight beginning August 11, 2001. Simultaneously, the inter-bank term liabilities of original maturity of 15 days to one-year were exempted from the CRR prescription. Fortnightly repo auctions were introduced from November 5, 2001.

In order to achieve a smooth phasing out of non-bank institutions from call/notice money market, non-bank financial institutions were permitted to lend, on an average, up to 85 per cent of their average daily lending during 2000-01 in a reporting fortnight, effective May 5, 2001; corporates were phased out from lending in this market, effective July 1, 2001. With the full-scale operationalisation and wide accessibility of the NDS and the CCIL, non-bank participants would be allowed to lend, on an average, in a reporting fortnight up to 75 per cent of their average call lending during 2000-01.

Efforts are underway to define the prudent limits on exposure of banks to the call money market so as to reduce the chronic reliance of banks on call market other than for meeting unforeseen mismatches. Accordingly, as announced in the Monetary and Credit Policy for 2002-03, prudential limits on the exposure of commercial banks to call/notice money market were stipulated in two stages.

The daily borrowings of State Co-operative Banks (SCBs) and District Central Co-operative Banks (DCCBs) in call/notice money market should not exceed 2.0 per cent of their aggregate deposits as at the end of March of the previous financial year.

Total Views: 433Word Count: 458See All articles From Author

Add Comment

Stock Market/Future Market/Commodity Market Articles

1. Greylabelfx: Your Partner In Premium Grey Label Trading Platforms Met5
Author: Pari Patil

2. Erp Software Is The Best Erp Solution For Indian Manufacturers
Author: sumanth

3. How Do Currencies Affect The Metal Market?
Author: Meta Market

4. The Impact Of Paxful Clone Script On The Defi Ecosystem
Author: AnAinfo

5. The Most Effective Way To Reach Coinbase For Urgent Issues
Author: Mathrobin

6. Why Every Crypto User Should Save A Trusted Crypto Support Number
Author: Mathrobin

7. Waaree Energies Unlisted Share: Strategic Expansion And Upcoming Ipo
Author: Deevay Rattan

8. How To Choose The Right Broker And Open A Free Demat Account
Author: Stock Broker in India

9. Tiktok Editing Services To Help You Go Viral: What You Need To Know
Author: Trending Bizzs

10. Top 5 Tools Every Short Form Video Editor Should Use
Author: Trending Bizzs

11. Emerging Strategies For The Future Of Digital Marketing
Author: Omitechno

12. Revolutionizing Enterprise Finance With Custom Ton Wallet Solutions
Author: oliverethanrobin

13. Using Technical Analysis And Stock Charts: A Beginner's Guide
Author: Neha Jain

14. A Complete Guide To Online Cfd Trading Understanding
Author: Spectra Global

15. How To Invest In The Stock Market: A Detailed Guide
Author: Abhishekh Bhandare

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: