ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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MONEY MARKET-House for Bills

House for Bills THE need for a discount house as a money market intermediary was first stressed by the Banking Commission in 1972. Its importance was reiterated by the Working Group to Review the Cash Credit System later in 1979. The latest to underscore the need for a body to develop the money market was the Working Group on the Money Market (the Vaghul Committee) and this time the Reserve Bank has been quick to accept the recommendation and implement it. Accordingly, the Discount and Finance House of India (DFHI) has been set up with a paid up capital of Rs 100 crore contributed by the Reserve Bank, the public sector banks and the financial institutions in the proportion of 5:3:2. The finance house will also enjoy a line of credit from the public sector banks and refinance from the RBI. The intention is that the RBI would be able to send signals to the market about the emerging situation in regard to overall liquidity through the amount of refinance from it and the rate of interest on such refinance. In other words, the money market will be a ''focal point for the central bank for influencing liquidity in the economy"

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