Institutions of Money Market

Institutions of Money Market

Central Bank:

The central bank of the country is the pivot around which the entire money market revolves. It acts as the guardian of money market and increase or decrease the supply of money and credit in the interest of stability of the economy.

Commercial Bank:

Commercial bank also deals in short-term loans, which they lend to business and trade. They discount bills of exchange and lend through advances and overdrafts.

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Non-Bank Financial Intermediaries:

Besides the commercial banks, there are non-bank financial intermediaries, which lend short-term funds to borrowers in the money market. Such financial intermediaries are savings banks, investment houses, insurances companies, pension funds and other financial corporations.

Discount Houses and Bill Brokers:

In developed money markets, private companies operate discount houses where as bill brokers operate in under developed money market. Bothe discount houses and bill brokers act as intermediaries between borrowers and lenders by discounting bill of exchange at a nominal commission.

Acceptance Houses:

The institution of acceptance houses developed from the merchant banker who transferred their headquarters to the London Money Market in 19^th and the yearly 20^th century. They act as agents between exporters and importers or lender and borrower. They accept bills drawn on trader whose financial position is not strong in order to make the bills negotiable in money market. However, their importance has declined because the commercial bank has undertaken the acceptance business.

Specialized Financial Institutions:

Specialized financial institutions like agriculture banks and industrial banks etc. provide loan to difference sectors of the economy for development.