![]() ![]() ![]() In developed money markets, private companies operate discount houses. Such financial intermediaries are savings banks, investment houses, insurance companies, provident funds, and other financial corporations. Non-bank Financial Intermediaries:īesides the commercial banks, there are non-bank financial intermediaries which lend short-term funds to borrowers in the money market. They discount bills of exchange and treasury bills, and lend against promissory notes and through advances and overdrafts. Commercial Banks:Ĭommercial banks also deal in short-term loans which they lend to business and trade. But controls the money market through variations in the bank rate and open market operations. It does not itself enter into direct transactions. It acts as the guardian of the money market and increases or decreases the supply of money and credit in the interest of stability of the economy. The central bank of the country is the pivot around which the entire money market revolves. They comprise the following types of institutions: 1. The various financial institutions which deal in short term loans in the money market are its members. The money market is a dynamic market in which new money market instruments are evolved and traded and more participants are permitted to deal in the money market. These intermediaries comprise the Federal Reserve Banks in the USA or the Bank of England in England, commercial banks, insurance companies, business corporations, brokerage houses, finance companies, state and local government securities dealers. In the open money market, idle funds drawn from all- over the country are transferred through intermediaries to the New York City market or the London market. In the former, banks and financial firms supply funds to local customers and also to larger centres such as London for direct lending. The money market is divided into direct, negotiated, or customers’ money market and the open or impersonal money market. It is a wholesale market where large numbers of financial assets or instruments are traded. All these markets are closely interrelated so as to make the money market. Thus the money market consists of call and notice market, commercial bills market commercial paper market, treasury bills market, inter-bank market and certificates of deposit market. In other words, “it is a network of market that are grouped together because they deal in financial instruments that have a similar function in the economy and are to some degree substitutes from the point of view of holders.”
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