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1) Organized Sector : The organised sector
• Trade bills refer to bills of exchange of the money market consists of the
drawn on and accepted by a trader (trade Reserve Bank of India, commercial banks,
acceptance) in payment of goods.
co-operative banks, regulated financial
• Promissory note is a financial instrument intermediaries etc. Let us now discuss the
that contains a written promise by one organized sector of the money market in
party to pay another party a definite sum of India.
money, either on demand or at a specified a) Reserve Bank of India (RBI): Every
future date. country in the world has a Central Bank
which is at the apex of the banking system.
Structure of Money Market in India :
The money market in India is dichotomous It is entrusted with the responsibility of
by nature. It comprises of both, the organized regulating the money market in the country.
Reserve Bank of India is the central bank of
sector as well as the unorganized sector. The our country. RBI was set up on the basis of
organized sector includes the Reserve Bank of the recommendations of the Hilton Young
India (RBI), commercial banks, co-operative Commission. The RBI Act of 1934 provides
banks, development financial institutions, the statutory basis of the functions of the
investment institutions and the Discount and bank. RBI commenced its operations on 1 st
Finance House of India (DFHI). The unorganized April, 1935 as a private shareholders’ bank.
sector on the other hand, comprises of indigenous RBI was nationalized on 1 January, 1949.
st
bankers, money lenders and unregulated non- It is the most important constituent of the
bank financial intermediaries. money market.
Money market centres in India are located Popular Definitions of Central Bank :
at Mumbai, Delhi and Kolkata. However,
Mumbai is the only active money market centre Dr. M. H. de Kock : “Central bank is one which
in India with money flowing in from all parts of constitutes the apex of the monetary and banking
the country. structure of the country.”
The following chart explains the structure Prof. W. A. Shaw : “Central bank is a bank
of money market in India : which controls credit.”
RBI
COMMERCIAL BANKS
ORGANIZED
SECTOR CO-OPERATIVE BANKS
DEVELOPMENT FINANCIAL
INSTITUTIONS
DISCOUNT AND FINANCE Functions of Reserve Bank of India
HOUSE OF INDIA
1) Issue of Currency Notes : RBI has the
INDIGENOUS BANKERS sole right to issue currency notes of all
UNORGANIZED denominations, except one rupee note
SECTOR MONEY LENDERS and coins. As per the ‘Minimum Reserve
UNREGULATED NON-BANK System’ of 1957, RBI is required to maintain
FINANCIAL INTERMEDIARIES minimum gold and foreign exchange
Fig. 9.1 reserves of Rs 200 crores, out of which at
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