Functions & Objectives of Money Market Instruments

Functions & Objectives of Money Market Instruments

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• Extends funds - Instruments of the Money Market help to give transient assets to the private and public foundations who need finance for their functioning capital prerequisites. Discounting trade bills through brokers, discount houses, acceptance houses, and commercial banks provides these funds. As a result, the instruments of the money market have the potential to support the growth of domestic and international trade, industry, and commerce.

• Utilization of Surplus Funds - Money market instruments provide banks and other financial institutions with the opportunity to profitably utilize their surplus funds for a brief period of time. Commercial banks, large non-financial corporations, states, and other local governments are among them.

• There is no need to borrow money from banks - in a developed money market. Commercial and central banks do not need to borrow money. They can, however, call in some of their loans from the money market if they are short on cash. In addition, the majority of commercial banks would rather recall their loans from the central banks at a higher interest rate than do so.

• Extends funds - Instruments of the Money Market help to give transient assets to the private and public foundations who need finance for their functioning capital prerequisites. Discounting trade bills through brokers, discount houses, acceptance houses, and commercial banks provides these funds. As a result, the instruments of the money market have the potential to support the growth of domestic and international trade, industry, and commerce.

• Helps the Government - The money market instruments help the government borrow short-term funds at low interest rates from treasury bills. In addition, if the Government had to borrow money from the Central Bank or issue paper money, it would cause inflationary pressures in the economy.

• Contributes to the Successful Implementation of Monetary Policy - A well-developed money market will contribute to the successful implementation of the Central Bank's monetary policies. Central banks can only exert influence over the banking system and the economy through the money market.

• Emdorses liquidity - The Monet market helps in monetary strength by smoothening the exchange for assets starting with one area then onto the next. Additionally, economic mobility is crucial to the growth of business and industry. In addition to encouraging savings and investments, money market instruments increase financial asset liquidity and safety. By allocating savings into investment channels, the money market achieves equilibrium between the demand for and availability of loanable funds.

• Economy in Cash Use - The instruments of the money market deal with assets that are not cash but are equivalent to cash, allowing for a more efficient use of cash. As a result, it is regarded as a convenient means of transferring funds from one location to another.

• The currency markets not just assistance in that frame of mind of transient overflow reserves yet in addition help in bringing down momentary deficiencies.

• Money markets assist the Central Bank in regulating the economy's liquidity.

• The users of short-term funds receive assistance from the money market at a very reasonable cost to meet their requirements.

• It helps in the advancement of capital market and exchange and industry.

• Currency markets help in planning viable financial arrangements.

• Additionally, it streamlines the operations of commercial banks.

Important Goals of Money Market Instruments - A money market serves the following goals: