Odurinde Finance & Business Blog

Money market includes all the instruments which can help you grow the investments. Most popular method in market is to lend the money for short term. Generally the borrowing takes place at the large level but is not limited to big lenders.  This market is also referred as paper based market because many transactions are just completed in papers without actual money being transferred from one person to another. Many people ask, “what is the need of such market?” Actually the funding for large project comes from big lenders such as banks and other financial institutions. The money market spins around the interest rates. Interest rates are lower for deposits while lending rates are always higher. Margin is the earning for banks. Many banks operate primarily on floating margins. Banks need to find the ways which are effective and returns are assured. Money market is good place where these banks earn good profits.

Banks like to lend the money to big borrowers who require large money to fund the big projects. A well established borrower is a guarantee of good returns. Generally the span of lending is around 13 months or so. It depends from bank to bank, the agreed terms and conditions may differ. The fact remains the same, larger lending attracts good margin. There are many institutional investors who look for money for short term. Sometimes, these large corporations require large funding for completing project. Money market also has good reach in government sector. One government organization funds the project of other, just on paper. There may or may not be the actual transaction of money. It is convenient method for government to move money from one department to another. Money market is an interesting field to watch. Although there are many rules and regulations related to lending which are followed for compliance. There are some limitations as well but after all it is money, which every organization has to earn to survive.