Money market of India can be classified into two parts. They are:
(A) Organized money market and
(B) Unorganized money market
Organized money market:
- The organized money market is a formal money market. It consists of Reserve Bank of India, commercial banks, mutual fund houses, etc.
- The financial instruments (assets) traded in organized money market include treasury bills, certificate of deposits, call money, etc.
- In India, organized money market is systematically co-ordinated and regulated by Reserve Bank of India.
- The Reserve Bank of India keeps changing the rate of interest to maintain adequate liquidity in money market.
Unorganized money market:
- The unorganized money market is an informal form of money market.
- Since it is an informal market, there is neither any regulation to run it nor there is any centralized institution on it. Thus, activities in this market are carried out without any rules and regulations.
- Money market consists of money lenders, landlords, pawn, indigenous bankers, shroffs, etc. But, there is no co-ordination between these entities and all of them operate according to their free will. They charge interest rate as per their will.
- Although unorganized money market is more developed in rural areas of India, it is also found in most urban areas.
