Question

Explain the reforms introduced in the money market in India.

Answer 1

The major reforms introduced in the money market of India are as follows:

1. Introduction of new instruments: New instruments like treasury bills, Commercial Papers (CPs), Certificates of Deposits (CDs) and Money Market Mutual Funds (MMMFs) have been introduced in the money market of India.
2. Liquidity Adjustment Facility: In the Indian money market, the Reserve Bank of India's Repos and Reverse Repos are part of the Liquidity Adjustment Facility (LAF).
3. Mechanism of market forces: In the money market of India, the emphasis is mainly on determining interest rates by market forces.
4. Facilities for faster transfer of funds: Real Time Gross Settlement (RTGS) and National Electronic Fund Transfer (NEFT) were used to speed up money transfers in India's money market.
5. Technological upgradation: An electronic dealing system has been introduced to bring technological upgradation to the money market of India.