An insight into the various defects and inadequacies of the Indian money market reveals that as compared to the advanced international money markets like the London Money Market, the New York Money Market, etc., Indian money market is still an undeveloped money market.
It is “a money market of a sort where banks and other financial institutions lend or borrow funds for short periods.” The following characteristics of Indian money market highlight its undeveloped nature:
(i) The Indian money market does not possess highly developed and adequately developed banking system.
(ii) It lacks sufficient and regular supply of short-term assets such as bills of exchange, treasury bills, short-term government bonds, etc.
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(iii) There is no uniformity in the interest rates which vary considerably among different financial institutions as well as centers.
(iv) In the Indian money market, there are no dealers in short-term assets who can function as intermediaries between the government and the banking system.
(v) No doubt, a well-developed call money market exists in India; there is absence of other necessary sub-markets such as the acceptance market, commercial bill market, etc.
(vi) There is no proper coordination between the different sectors of the money market.
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(vii) The Indian money market does not attract foreign funds and thus lacks international status.