Money Market
Money Markets can be broadly divided into three types:
1. International Money Market
2. National Money Market
3.Local Money Market
As the terms denote the international money market deals with international money transactions and cost of money and cost of international monetary transactions. Typically these transactions occur between different governments, different central as well as commercial banks, besides between corporations across countries. International money market thus consists of inter currency exchanges depending on various international factors like strength of different economies, trends in international trade, national budgetary deficits, requirements of capital as well as current accounts of national economies, terms of trade etc.
The national money markets consists of the money market within the national boundaries of a country and are broadly governed by the demand and supply of money within the national economy including the capital requirements of its companies. For example the call money rates( short term cost of borrowing money ) in Mumbai vary between 24% to 120% per annum. The regular bank interest rates on commercial borrowings for example in Mumbai are between 18% to 30% while on individual credit’s the banks are almost uniformly charging between 36% to 40%. The cost of commercial borrowing in Japan is 0.5% while in most developed countries it is negligible on the other hand.
Local money market refers to localised operations in borrowing and lending in a limited area within national geographical boundaries of a country. Various licensed and unlicensed including informal local money lenders in India or payday loans companies in the west are examples of such localised operations of the money market.
