Excess and lack of funds are the two situations which are responsible for mobilisation of funds. These situation can be for a long term or short term. As per the time requirement, there are option in form of markets are available. Money market is one of such market which is suitable for short term requirements.
Excess funds are deployed in the money market, which in turn is availed of to meet temporary shortages of cash and other obligations. Money market provides access to providers and users of short-term funds to fulfill their investments and borrowings requirements respectively at an efficient market clearing price. It performs the crucial role of providing an equilibrating mechanism to even out short-term liquidity, surpluses and deficits and in the process, facilitates the conduct of monetary policy.
Important institutions operating in the money market are central banks, commercial banks, acceptance house, non banking financial institutions, bill brokers etc.The main credit instrument of the money market are call money, treasury bills, commercial bills, commercial papers and bills of exchange.
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