The brief debt investment in trading is known as the money market. Large-scale transactions between institutions and traders are involved. Money Market Accounts and Individual Investors acquire mutual funds at the retail level of the market. The issuer raises capital by selling financial products with short maturities. Money Market Funds is the name given to them. They serve as security for unsecured debt with fixed interest rates. The high credit rating of money market Funds ensures that issuers can deposit their money there for the short term and receive predictable returns.
Characteristics of Money Market Funds
High-Liquidity
High liquidity is a crucial aspect of financial assets. It helps the investor produce a stable income. Additionally, high liquidity replaces the short-term maturity. The tools of the money market are near copies of money.
Dependable Investment
One of the safest investment areas available nowadays is the financial Funds. Money market Funds issuers have excellent credit ratings. As a result, there is a lesser chance of losing your invested money and the returns are fixed.
Fixed Payouts
Discounts on the face value are available in the money market. Therefore, at the maturity time, the investor receives his advance. It aids people in choosing the right Funds based on their demands and time horizon for investments.
The Goal of the Money Market
Maintaining Market Liquidity
Maintaining economic liquidity is the Money Market's primary duty. The tools of the money market are crucial to the framework of monetary policy. Short-term securities are used by the Reserve Bank of India to obtain market liquidity within the desired range.
Provides Money
The Money Market offers great opportunities for people, banks, and both small and large organizations to borrow money quickly. Any other money market Funds may be sold by the institutions in order to raise funds. They can also secure short-term financing. Instead of banks, the institutions can borrow money from the marketplace. Because the procedure is simple and the interest rates are cheaper than those of business loans. Commercial banks may use money market Funds in accordance with Reserve Bank of India regulations in order to maintain the required minimum level of cash reserves.
Utilization of Extra Money
The Money Market makes it possible for investors to sell their extra money. It assists in maintaining their liquidity and generating significant income at the same time. Investors' savings are directed into investment channels through the money market. Banks and other non-financial corporations are among the investors. They have businesses and banks that are owned by both the state and municipal governments.
Increases Financial Capability
The total growth of our economy depends on the financial flexibility of its citizens. The money market promotes economic motion by making it simple to move money from one industry to another. Additionally, it guarantees transactional transparency. It encourages the nation's commercial and industrial growth. Therefore, having high financial mobility is essential.
Facilitates Monetary Policy
The Reserve Bank of India's money market was shaped by its monetary policies. The short-term interest rate is influenced by the activities on the money market. The country's current monetary and banking structure can be seen through the short-term interest rates. It will support the development of monetary policies and long-term interest rates by the Reserve Bank of India. Additionally, it aids in developing a sound banking policy.
Source from: navimumbaihouses
