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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.
165 videos|298 docs|142 tests

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