Relevance of Development of Money Market
The development of the money market is important for the debt market especially through the process of liquidity. The money market provides the required finances and enhances the liquidity in the market and leads to the short end of the yield curve. Various components of the money market foster the development in various ways. The repo market contributes to the development of an active Government Securities market and vice versa because the lending and borrowing processes are conducted safely through repos. There must be a necessary coordination between the Government Securities and money markets where the interest rates are market determined and the central bank manages the debt and monetary policy functions.
Many measures have been taken in recent years to develop a short-term yield curve with deep liquidity in the money market in India. The four important measures in this regard are as follows: