What is meant by ‘Money Market’? Explain any two instruments used in Money Market.

Money Market is a market for short-term funds which deals in monetary assets whose period of maturity is up to one year. Following are the money market instruments:

(i) Call Money: Call money is short-term finance repayable on-demand with a maturity period of one day to fifteen days used for inter-bank transactions. It is primarily used by Commercial Banks to maintain a minimum cash balance known as Cash Reserve Ratio (CRR) as stipulated by the RBI.

(ii) Treasury Bills: Treasury bills (T-Bills) are issued by the Reserve Bank of India on behalf of the Government of India as a short-term liability, and sold to the banks and to the public. The issue period ranges from 14 to 364 days. T-Bills are negotiable instruments, i.e., they are freely transferable. They are issued at a discount and redeemable at par.

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