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banking terms

By Victor S. Fischer
  ✍️ CRR Cash Reserve Ratio is the minimum fraction of total deposits of a bank’s customers that banks have to hold as reserves with the central bank. ✍️ SLR Statutory Liquidity Ratio is the ratio of liquid assets to the net demand and time liabilities. ✍️ LAF Liquid Adjustment Facility is a tool to allow banks to borrow money through repurchase agreements. It consists of repo and reverse repo operations. ✍️ MSF Marginal Standing Facility allows scheduled banks to borrow funds overnight from RBI against approved government securities. ✍️ MSS Market Stabilization Scheme is a monetary policy intervention by RBI to withdraw excess liquidity by selling government securities in the economy. ✍️ OMO Open Market Operations refers to the buying and selling of government securities in the open market so as to expand or contract the amount of money in the banking system. ✍️ REPO Repo...
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Major Defects of Indian Money Market

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Defects of Indian Money Market

The main defects of the Indian money market are the following:
1. Narrow coverage:

The organized banking system is still a very large component of the Indian money market. The  Indian banking system widely covers metropolitan cities and the towns. But, The organized sector of the banking system is conspicuous by its absence in many rural areas.

This means that lower income groups in many rural areas still do not enjoy banking facilities.
2. Imbalance between demand and supply:

The Indian money market is characterized by inadequate supply of short-term assets. This creates a peculiar situation.

On the one hand banks with surplus funds cannot invest them profitably short period. On the other hand, those who require short-term funds are unable to raise them from the market at competitive rates.
3. Lack of co-ordination:

There is hardly any co-ordination between the different segments of the money market. The reason in easy to find out. The different segments of the money market are very loosely interrelated at present. As a consequence there exist different interest rates in different sub-markets.
4. Only domestic coverage:

Finally, the Indian money market mainly targets domestic market. So, it is very difficult to attract foreign funds. The main reason seems to be that rupee is not a major currency in the leading foreign exchange markets of the world.


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