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Organised Money Market - 2 Video Lecture | Indian Economy for UPSC CSE
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FAQs on Organised Money Market - 2 Video Lecture - Indian Economy for UPSC CSE
| 1. What is an organized money market? |  |
Ans. An organized money market refers to a financial market where short-term borrowing and lending of funds take place. It involves the trading of highly liquid and low-risk instruments such as treasury bills, commercial papers, and certificates of deposit.
| 2. How does an organized money market function? | |
Ans. In an organized money market, financial institutions, corporations, and governments can borrow or lend funds for short periods, usually less than one year. Participants can trade these short-term instruments through organized exchanges or over-the-counter platforms, facilitating efficient liquidity management and short-term investment opportunities.
| 3. What are the benefits of participating in an organized money market? | |
Ans. Participating in an organized money market offers several benefits, including:
- Liquidity: Investors can easily convert their short-term investments into cash as these markets provide high liquidity.
- Safety: These markets deal with low-risk instruments, reducing the likelihood of default and ensuring the safety of investments.
- Yield: Investors can earn competitive yields on their short-term investments through the interest rates offered in the organized money market.
- Diversification: These markets offer a range of instruments and issuers, allowing investors to diversify their portfolios and mitigate risks.
| 4. Who are the participants in an organized money market? | |
Ans. The participants in an organized money market include financial institutions such as banks, mutual funds, insurance companies, and pension funds. Corporations and governments also participate by issuing short-term instruments to raise funds or investing their excess cash reserves.
| 5. How does an organized money market contribute to the overall economy? | |
Ans. Organized money markets play a crucial role in the overall economy by providing a platform for short-term borrowing and lending. They facilitate efficient allocation of funds, enable liquidity management for financial institutions, and support the functioning of the broader financial system. Moreover, by offering a safe and reliable avenue for short-term investments, these markets contribute to enhancing investor confidence and stability in the financial sector.
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Nov 24, 2024 Last updated |
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