A lesser level comparison of London, New York and Indian Money Market may be understood with the help of following table:
1. Period of Development
It has come into prominence only during the Second World War period.
2. Nature of Growth
Organized and well developed but next to London Money Market.
3. Weapons used to Control Money Market
Bank rate and open market The Federal Banks use more CRR, ‘Repo’ transactions,
The acceptance houses, Discount Houses, etc. are playing main role in the money market. direct weapons of credit controls as variation of cash reserve ratios, etc.
4. Specialized Institutions
It does not have such institutions. Commercial banks perform these functions.
Moral suasion OMO of Treasury Bills, etc.
DFHI, Primary Dealers Development Financial Institutions, Money Market Mutual Funds, etc.
5. Competition among Institutions
The functions of the specialized institutions like discount houses, acceptance houses, Bill brokers, Commercial banks, etc., are all complementary and these institutions do not compete among themselves for funds.
In U.K. branch banking prevails. The banking system is mainly under the control of “Big five” Banks. All banks have their branches in London.
In England there is only Central Bank “The Bank of England” for the entire country.
In this market various institutions function independently and hence compete for funds in the money market. But the competition is healthy.
6. System of Banking
In U.S.A. unit banking is prevailing, since there are numerous banks of small size, they do not have their banks in Washington.
7. Number of Central Banks
In U.S.A there are 12 “Federal Reserve Banks” for different regions. With Federal Reserve System at the apex level.
Healthy competition is gaining ground. RBI determines the players in the market- large number of lenders, including financial institutions, mutual funds, big corporate (through DFHI, etc.). However borrowers are restricted to commercial Banks and few institutions like DFHI primary dealers.
In India branch banking is popular. Even then many private sector banks are small in size.
In India there is only “RBI” for the entire central banking operations.
Recent Trends in Indian Banking
Commercial Banks extend financial assistance or the credit facilities in many ways. Although all Credit facilities are basically a loan, different methods of financing are adopted depending upon the period of finance, purpose of finance, quantum of balance, etc.
Some of these methods of financing introduced in the Indian banking in the recent period have been explained below. Similarly, the repayment of loan is also arranged in specific ways to suit customers/ borrowers requirements. Few such methods of repayment have also been explained in this chapter.
Indian Banking System developed enormously after independence. Particularly after nationalisation of banks there has been a multi-dimensional development.
Nationalisation of banks provided an impetus to the banking development and the banks started functioning with social responsibility. The growth in various banking areas has been discussed in the latter part of this chapter.
First let us see the types of financing
1. Take out Financing
2. Revolving Credit Facilities
3. Ever greening of Loan
4. Syndicated Loan
5. Bridge Loan
6. Consortium Finance
7. Preferred Financing
8. Non-Fund Based Business
Types of Repayment System
1. Bullet Payment System
2. Balloon Payment System
Let us discuss these items one by one.