1. Sunitha.S Assistant Professor School of Management Studies, National Institute of Technology (NIT) Calicut MONETARY ECONOMICS: Financial System

2. 2 Financial System Financial institutions  Commercial banks, RBI, NBFIs, companies Financial Assets  Currency, deposits, cheques, bills, bonds, shares,  Equities, debentures, T-bills, certificates of deposits, commercial papers Financial markets  Money market (short term funds)  Capital market (medium & long term funds) Primary Market (New Issue Market) Secondary Market (Stock Market)

3. 3 Money Market

4. 4 Market in which short term funds are borrowed and lent are called as money market. Call Money Market Commercial Bill Market Treasury Bill Market Certificate of Deposit Commercial Paper Submarkets

5. 5 Call Money Market Deals with one day loans (called as call loans or call money) Who are the Participants?  usually banks borrowers are banks who are temporarily short of funds Suppliers are banks with temporary excess of cash

6. 6 Commercial Bill market Bill of Exchange (BOE) is like a promissory note,which has a maturity period of 3 months. “I owe you so and so amount of money after 3 months from the present date.” Either the BOE holder could wait till it gets matured or get it discounted or get encashed through the process of discounting

7. 7 Treasury Bill market T Bills are short term debt instruments issued by the Govt to get funds. Who are the participants?  Borrowers: mostly commercial banks  Lender: Govt departments Sold by RBI through auction Maturity: 91days,182 days,365 days Zero default risk and hence more safer

8. 8 Certificate of Deposit (CD) Debt instruments sold by banks & other depository institutions Borrowed mainly by banks

9. 9 Commercial Paper(CP) Direct short term finance issued by large creditworthy companies Borrowed by banks, companies Maturity : 3 months

10. 10 Thank You