Which of the following is one of the major participants in the money market?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → State Governments
Option (1) State Governments — Correct. The major participants in the money market are the RBI, commercial banks, non-banking finance companies, State Governments, large corporate houses and mutual funds.
Option (2) Foreign investors — Incorrect. Foreign investors take part in the capital market. The money market is by and large left to institutional participants.
Option (3) Depository participants — Incorrect. A depository participant is the link between an investor and a depository such as NSDL or CDSL. It keeps the investor’s demat account. It serves investors in shares and debentures of the capital market, so it is not one of the major participants in the money market.
Option (4) Stock brokers — Incorrect. An investor approaches a stock broker to buy or sell securities on a stock exchange, which is part of the capital market. Stock brokers are not among the major participants in the money market.
NCERT (Pre-rationalised Edition): “MONEY MARKET The money market is a market for short term funds which deals in monetary assets whose period of maturity is upto one year. These assets are close substitutes for money. It is a market where low risk, unsecured and short term debt instruments that are highly liquid are issued and actively traded everyday. It has no physical location, but is an activity conducted over the telephone and through the internet. It enables the raising of short-term funds for meeting the temporary shortages of cash and obligations and the temporary deployment of excess funds for earning returns. The major participants in the market are the Reserve Bank of India (RBI), Commercial Banks, Non-Banking Finance Companies, State Governments, Large Corporate Houses and Mutual Funds.” “(i) Participants: The participants in the capital market are financial institutions, banks, corporate entities, foreign investors and ordinary retail investors from members of the public. Participation in the money market is by and large undertaken by institutional participants such as the RBI, banks, financial institutions and finance companies. Individual investors although permitted to transact in the secondary money market, do not normally do so.” |