Money market is a centre where short-term funds are supplied and demanded. Thus, the main constituents of money market are the lenders who supply and the borrowers who demand short-term credit.
1. Supply of Funds:
There are two main sources of supply of short-term funds in the Indian money market: (a) unorganised indigenous sector, and (b) organised modern sector.
(i) Unorganized Sector:
The unorganised sector comprises numerous indigenous bankers and village money lenders. It is unorganized because its activities are not controlled and coordinated by the Reserve Bank of India.
(ii) Organized Sector:
The organized modern sector of Indian money market comprises : (a) the Reserve Bank of India; (b) the State Bank of India and its associate banks; (c) the Indian joint stock commercial banks (scheduled and non-scheduled) of which 20 scheduled banks have been nationalised; (d) the exchange banks which mainly finance Indian foreign trade; (e) cooperative banks; (f) other special institutions, such as, Industrial Development Bank of India, State Finance Corporations, National Bank for Agriculture and Rural Development, Export-Import Bank, etc., which operate in the money market indirectÂly through banks ; and (g) quasi- government bodies and large companies also make their funds available to the money market through banks.
2. Demand for Funds:
In the Indian money market, the main borrowers of short-term funds are: (a) Central Government, (b) State Governments, (c) Local bodies, such as, municipalities, village panchayats, etc., (d) traders, industrialists, farmers, exporters and importers, and (e) general public.