Page 36 - Banking Finance July 2022

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Primary market or New issue market
Secondary market or Stock exchange

Government Securities Market
It is otherwise called Gilt-Edged securities market. It is a
market where Government securities are traded. In India
there are many kinds of Government Securities-short term
and long term.

Long Term Loans Market
Development banks and commercial banks play a significant
role in this market by supplying long term loans to corporate
customers. Long term loans market may further be classified
into:
Term loans market

Mortgages market Short-Term Loan Market: It is a market where short-term
Financial Guarantees market loans are given to corporate customers for meeting their
working capital requirements.
Importance of Capital Market
Foreign Exchange Market
Absence of capital market acts as a deferent factor to capital
The term foreign exchange refers to the process of
formation and economic growth. Resources would remain
converting home currencies into foreign currencies and vice
idle if finance is not funnelled through capital market.
versa.
Money Market
Functions: The most important functions of this
Money market is a market for dealing with financial assets
market are :
and securities which have a maturity period of up to one
To make necessary arrangements to transfer purchasing
year. In other words, it is a market for purely short term
power from one country to another.
funds. The money market may be subdivided into four. They
are: To provide adequate credit facilities for the promotion
Call money market of foreign trade.

Commercial bills market To cover foreign exchange risks by providing hedging
facilities.
Treasury bills market
Short term loan market
Financial Rates of Return
Most households in India still prefer to invest on physical
Call Money Market: The call money market is a market for
assets like land, buildings, gold, silver etc. But, studies have
extremely short period loans say one day to fourteen days.
shown that investment in financial assets like equities in
So, it is highly liquid.
capital market fetches more return than investments on
Commercial Bills Market: It is a market for bills of exchange gold. It is imperative that one should have some basic
arising out of genuine trade transactions. In the case of knowledge about the rate of return on financial assets
credit sale, the seller may draw a bill of exchange on the also.The return on Government securities and bonds are
buyer. comparatively less than on corporate securities due to lower
risk involved therein.
Treasury Bills Market: It is a market for treasury bills which
have 'short-term'maturity. Recent Trends: With a view to bringing the interest rates

36 | 2022 | JULY | BANKING FINANCE