Money Market is a very important segment of a financial system. It is the market for dealing in monetary asset of short-term nature. Short-term funds up to one year and financial assets that are close substitutes for money are dealt in the Money Market. Money Market instruments have the characteristics of liquidity (quick conversion into money),minimum transaction cost and no loss in value.
Excess funds are deployed in the Money Market, which in turn is availed of to meet temporary shortages of cash and other obligations. Money Market provides access to providers and users of short-term funds to fulfill their investments and borrowings requirements respectively at an efficient market clearing price. It performs the crucial role of providing an equilibrating mechanism to even out short-term liquidity, surpluses and deficits and in the process, facilitates the conduct of monetary policy. The Money Market is one of the primary mechanism through which the Central Bank (RBI) influences liquidity and the general level of interest rates in an economy. The Bank’s interventions to influence liquidity