CHAPTER: - 9 MONEY MARKET AND CAPITAL MARKET OF INDIA Q.7. Answer the following: 1. Explain the problems faced by the money market in India

Balbharati solutions for Economics HSC 12th Standard Maharashtra State Board

CHAPTER: - 9 MONEY MARKET AND CAPITAL MARKET OF INDIA

Q.7. Answer the following:

1. Explain the problems faced by the money market in India.

Compared to advanced countries, the Indian money market is less developed in terms of volume and liquidity.

Following points explain the problems of the Indian Money Market:

Dual Structure of the Money Market: Presence of both, the organized and unorganized sectors in the money market leads to disintegration, lack of transparency, and increased volatility. The unorganized markets lack coordination and do not come under the direct control and supervision of the RBI.

Lack of uniformity in the rates of interest: The money market comprises various entities such as commercial banks, co-operative banks, non-bank finance companies, development finance institutions, investment companies, etc. The category of borrowers is also different.

Shortage of funds: Money market faces a shortage of funds due to inadequate savings. Low per capita income, poor banking habits among the people, indulgence in wasteful consumption, inadequate banking facilities in the rural areas, etc. have also been responsible for the paucity of funds in the money market.

Seasonal fluctuations: Demand for funds varies as per the seasons. During the peak season, from October to June, finance is required on a large scale for various purposes such as trading in agricultural produce, investment in business activities, etc. This results in wide fluctuations in the money market.

Lack of financial inclusion: Banking facilities in the country are still inadequate and inaccessible to the vulnerable groups such as the weaker sections and the low-income groups. This shows a lack of financial inclusion.

Delays in technological up-gradation: Use of advanced technology is a pre-requisite for the development and smooth functioning of financial markets. Delays in the up-gradation of technology hamper the working of the money market.

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