Important recommendations for activating and developing the Indian money market

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In, 1986, the Reserve Bank of India set up a Working Group under the chairmanship of Mr. N. Vaghul to examine the possibilities of enlarging the scope of money market and to recommend specific measures for evolving other suitable money market instruments.

The Working Group submitted its Report in January, 1987. It has made a number of recommendations for activating and developing the Indian money market. Some Important recom­mendations are as follows:

(i) Measures should be taken to improve the operation of the call money market.

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(ii) Rediscounting market should be developed with a view to facilitating the emergence of genuine bill culture in the country.

(iii) A short-term commercial paper should be introduced.

(iv) An active secondary market for Government paper, especially a ‘182 days Treasury Bill’ Refinance facility, should be developed.

(v) A Finance House should be set up to deal in short-term money market instruments.

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(vi) Banks and private non-bank financial institutions should be encouraged to provide factoring services.

(vii) There should be continuing development and refinement of money market instruments, and every new instrument must be approved by the Reserve Bank.

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