Search your Topic HERE....

October 12, 2013

Reforms in the Money Market

Leave a Comment

sponsored links

The Reserve Bank of India has taken the following measures to implement the recommendatoins of the Working Group since 1987.

  1. Reduction of Interest Rate of Bill Discounting : With a view to make bill financing attractive to the borrowers, from April 1987 the effective interest rate on bill discounting for categories subject to the maximum lending rate has been fixed at a rate one percentage point lower than the maximum lending rate.
  2. Raising of Ceiling on Bill Re-discounting Rate : In order to attract additional funds into re-discount market, the ceiling on the bill re-discounting rate has been raised from 11.5% 12.5%.
  3. Increase in number of participants in the Market : Access to bill re-discounting market has been increased by selectively increasing the number of participants in the market.
  4. Introduction of 182 and 364 Days Treasury Bills : 182 Day Treasury Bills have been introduced in the year 1987. In 1992-93, 364 Day Treasury Bills were introduced in and the auction of 182 Day Bill have been discounted. Like 182-Day Treasury bills, 364 Day Treasury bills can be held by commercial banks for meeting Statutory Ratio.
  5. Remitting the Duty on Usance Bills : In August 1989, the government remitted the duty on usance bills. This step removed a major administrative constraint in the use of bill system.
  6. Total Deregulation of Interest Rates : Total deregulation of money market interest rates with effect from May 1, 1989 is a significant step taken by RBI towards the activation of money market. Removing the interest ceiling on money rates would make them flexible and lend transparency to transactions in the money market.    
  7. Introduction of Certificate of Deposits : Certificates of Deposits (CDs) were introduced in June 1989 to give investors greater flexibility in employment of their short-term funds.
  8. Introduction of Commercial Paper : Another money market instrument, Commercial Paper (CP), was introduced in 1990-91 to provide flexibility to the borrowers rather than additionally of funds over and above the eligible credit limit.
  9. Liberalization of Credit Authorization Scheme : Since July 1987, the Credit Authorisation Scheme (CAS) has been liberalized to allow for greater access to credit to meet genuine demand in production sectors without the prior sanction of the Reserve Bank.
  10. Establishment of DFHI : In April 1988, the Discount and Finance House of India Limited (DFHI) was established with a view to increasing the liquidity of money market instruments.
  11. Seting up Money Market Mutual Fund : In 1991, the scheduled commercial banks and their subsidiaries were permitted to set up Money Market Mutual Fund (MMMF) and bring money market instruments with in the reach of individuals and small bodies.
sponsored links

0 Responses:

Post a Comment

Related Posts Plugin for WordPress, Blogger...