Commerce Notes

Advantages and Disadvantages of call money market

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by Anjali Yadav
  • Advantages and Disadvantages of call money market
    Advantages and Disadvantages of call money market

What are the advantages and disadvantages of call money market ? Describe the discount market or commercial bills market?

Advantages of Call Money Market

These are as under:

  1. It provides facility of high liquidity because money lent in this type of market can be called back at any time.
  2. Sudden payments and remittances are possible.
  3. It offers a profitable parking place for employing the surplus funds.
  4.  It helps the Government to raise short-term funds.
  5. Call loans are safe since the participants have a strong financial standing.
  6. It is helpful to central bank operations.

Disadvantages of Call Money Market

Following are the drawbacks of call money market in India:

  1. It is confined to only big industrial and commercial centres.
  2. Call money markets are not fully integrated.
  3. There is the volatile nature of the call money rates.

Discount Market or Commercial Bills Market

According to Section 5 of the Negotiable Instruments Act, 1881, “An instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument.”

A commercial bill is arised out of a genuine trade transaction i.e. credit transaction. It contains a written order from the creditor to the debtor to pay a certain sum to certain person, after a certain period. A bill of exchange is a self-liquidating paper.

Types of Bills: It may be of the following types:

  1. Demand and usance bills;
  2. Clean bills and documentary bills;
  3. Indigenous bills;
  4. Inland and foreign bills;
  5. Accommodation bills and supply bills;
  6. Export bills and import bills.

Operations: It can be classified into two parts:

  1. Discount market;
  2. Acceptance market.

Advantages of Commercial Bills Market: These are as under:

  1. These are highly liquid assets.
  2. Bills keep certainty of payment.
  3. It is a negotiable asset and self-liquidating.
  4. Bills represent advances for a definite period.
  5. If bills are dishonoured, the legal remedy is simple.
  6. The central bank can easily influence the money market.

Disadvantages of Commercial Bills Market

Following are the drawbacks of commercial bills market:

  1. India, bills are not popular. Here, there is a absence of bill culture.
  2. In India, foreign trade comparatively national income remains small.
  3. Stamp duty discourages the bill culture.
  4. There is a lack of active secondary market for bills.
  5. The banks have a nature to hold the bills till maturity.
  6. Banks prefer to purchase bills.

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Anjali Yadav

इस वेब साईट में हम College Subjective Notes सामग्री को रोचक रूप में प्रकट करने की कोशिश कर रहे हैं | हमारा लक्ष्य उन छात्रों को प्रतियोगी परीक्षाओं की सभी किताबें उपलब्ध कराना है जो पैसे ना होने की वजह से इन पुस्तकों को खरीद नहीं पाते हैं और इस वजह से वे परीक्षा में असफल हो जाते हैं और अपने सपनों को पूरे नही कर पाते है, हम चाहते है कि वे सभी छात्र हमारे माध्यम से अपने सपनों को पूरा कर सकें। धन्यवाद..

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