Financial Market — Secretarial Practice STD 12 Commerce / Arts — Question

Some important participants in the money market:
(i) Reserve Bank of India:
It is the most important participant in the money market. Through the money market, RBI regulates the money supply and implements its monetary policy. It issues government securities on behalf of the government and also underwrites them. It acts as an intermediary and regulator of the market.

(ii) Central and State Government:
Central Government is a borrower in the Money Market, through the issue of Treasury Bills (T-Bills). The T-Bills are issued through the Reserve Bank of India (RBI). The T-Bills represent zero risk instruments. Due to its risk-free nature banks, corporate, etc. buy the T-Bills and lend to the government as a part of its short-term borrowing program. The state government issues bonds called State Development Loans.

(iii) Public Sector Undertakings (PSU):
Many listed government companies can issue commercial paper in order to obtain its working capital.

(iv) Scheduled Commercial Banks:
Scheduled commercial banks are very big borrowers and lenders in the money market. They borrow and lend in call money market, short notice market, Repo and Reverse Repo market.

(v) Insurance Companies:
Both, the general and life insurance companies are usual lenders in the money market. They invest more in capital market instruments. Their role in the money market is limited.

(vi) Mutual Funds:
Mutual Funds offer varieties of schemes for the different investment objectives of the public. Mutual funds schemes are liquid schemes. These schemes have the investment objective of investing in money market instruments.