Ayussh Sanghi is teaching live on Unacademy Plus
Money Market By Ayussh Sanghi Part 6
Reserve Bank of India (RBI) . RBI was established in 1935 under the Reserve Bank of India Act, 1934 RBI regulates the money market. RBI mainly regulates the organised segment of the money market and the unorganised money market largely remains unregulated. RBI has taken many steps over the years to reform the Indian money market. Some of the majors reforms taken by RBI are as follows:
Reforms in money market 1. Various important interest rates related to banking sector as well as rates related to call money, commercial papers, CDs were deregulated as per the recommendations of S. Chakravarty Committee (1985) and Narsimham Committee (1991). 2. Reserve Bank of India took many measures to improve liquidity and stability in call money and term money markets. NBFCs were restricted from participating in call money and term money markets in 1998. 3. RBI introduced various diverse money market instruments like CDs in 1989 and commercial papers in 1990.
Ad hoc treasury bills were abolished in 1997. Introduction of Repo in 1992 and reverse repo rates in 1996. NBFCs were brought under the purview of RBI after the amendment of RBI Act in 1997. LAF or Liquidity adjustment facility was introduced in 2000 and this gave RBI better access over the interest rates in order to make liquidity adjustments in the market . .Debt recovery tribunals were set-up so that the banks could easily recover . Debt recovery tribunals were set-up so that the banks could easily recover the dues from the borrowers.
Discount And Finance House Of India (DFHI) Established by RBI in 1988 Owned by public sector banks, RBI and All-India financial institutions that have a share in its paid up capital. .DFHI was given the status of a Primary Dealer (PD) in 1996 DFHI has played an important role in stabilising the money market by developing an active secondary market in money market instruments' DFHI borrows and lends in the call, notice and term market. ndial papens, reasuy bill
Primary Dealers (PD) PDs are financial intermediaries registered with RBI. PDs play an important role in the over all development of 'primary and secondary government security markets' Some of the Primary Dealers in India are: SBI DFHI, PNB Gilts, Morgan Stanley India Primary Dealer etc