Financial Markets Class 12 Notes CBSE Business Studies Chapter 10 (Free PDF Download)

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Financial Markets Class 12 Notes CBSE Business Studies Chapter 10 (Free PDF Download)

Chapter No10
ProvidingNcert solutions
Chapter NameFinancial Markets 
SubjectBusiness studies
Medium English
Study MaterialsFree VVI Study Materials are Available
Download PDFFinancial Markets Class 12 Notes CBSE Business Studies Chapter 10 (Free PDF Download)

Financial Markets 

Key points of the lesson – The concept of capital market is related to long-term finance. Capital market refers to all those financial sources through which long-term finance is provided to industrial and commercial institutions. In the capital market, those financial assets which are of long term nature are dealt with, such as shares, debentures, bonds and other long term securities.

Primary market means the market in which shares, debentures, bonds and other securities are sold for the first time for the purpose of raising long-term capital. Thus, this market is related to new issues. For this reason the primary market is also called New Issues Market. Through this market, both new and old companies collect the necessary capital. 

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Secondary market means the market where buying and selling of previously issued securities takes place. When any security (shares and debentures etc.) is sold for the first time, it is a primary market operation, but when the same security is bought and sold again through the Stock Exchange. 

At present there are a total of 24 Skunch markets in India which are spread in different parts of India. The most prominent of these are the Bombay (Mumbai) Stock Exchange and the Indian National Stock Exchange Ltd. It is Mumbai. Here only those securities (shares) are bought and sold which are already listed in them. 

This buying and selling takes place through capitalized brokers. Money market means a market which deals in short-term funds. Under this, all those individuals, institutions and organizations are included who manage and use short-term funds. Thus, both lenders and borrowers of short-term funds are included in the money market.

Stock exchange market means a permanent and well-organized market where various types of shares, debentures of joint-stock companies, public utility institutions and government securities are bought and sold.

Over-the-Counter Exchange of India is also known as OTCI. The head office of OTCI is located in Mumbai. It has also established its offices in many other cities of India. There is variation in the functioning of its business. 

In this, not only its members but also interested companies and investors can do business. Its activities are supervised by the Government of India and SEBI. This is a special type of marketing which does not have its own physical location, that is, its market is spread all over the country through the counters of many marketing operators. 

OTCI market is a scripless, ringless electronic market in which a nationwide system of buying and selling of securities is operated through continuous communication channels.

National Stock Exchange of India Limited is a new automated stock exchange whose basic objective is to provide securities trading services at the national level. It was established as a non-profit making public company in November 1992 on the recommendations of the Pherwani Committee. 

It is a major chain marketing company of India whose head office is located in Mumbai and it is currently working in about 400 cities and towns. It deals in shares, debentures, bonds etc. of various companies and government securities.

The Securities and Exchange Board of India was established with the objective of protecting the interests of investors in securities business, looking after the functioning of scams spread across the country and establishing effective control over them. It is also known as ‘SEBI’. 

It was established as a statutory body under the ‘Securities and Exchange Board of India Act, 1992’ (SEBI Act, 1992) passed by the Indian Parliament. Is. It has a legal status, which has a separate legal existence and inalienable succession. Its head office is located in Mumbai and regional offices are located in Delhi, Kolkata and Dhannai respectively.


Q. 1. Describe the concept of capital market. *( Discuss the concept of capital market.)

Ans. Concept of Capital Market – The concept of capital market means a market in which long term securities are traded, like shares, debentures, bonds etc.

Q. 2. Mention the nature of capital market. (Explain the nature of capital market.)

Ans. Nature of Capital Market: 1. Dealing in long-term securities, 2. Part of the financial market, 3. Having two segments (a) primary market and b) secondary market, 4. arbitrators, 5. helpful in capital formation, 6. Having two formats

A) Organized capital market and (v) Unorganized capital market, 7. Helpful in liquidity and, 3. Difference in practical ownership.

Q. 3. How many segments are there in the capital market? (How many segments of capital market.) 

Ans. Segments of Capital Market – There are following two segments of capital market –

1. Primary market and 2. Secondary market.

Q.4 . Write the meaning of primary capital market. (What is the meaning of primary capital market?)

Ans. Meaning of Primary Capital Market – Primary market means the market in which shares, debentures, bonds etc. are sold for the first time with the purpose of collecting long-term capital.

Q.5. Explain the characteristics of primary market. (Explain the characteristics of primary market.)

Ans. Characteristics of Primary Market- 

1. Related to new issues, 2. No special place, 3. Before secondary market and 5. Various methods of pooling capital (h) Public issue (b) Private arrangement (c) Rights issue.

Q.6. Write the meaning of secondary market. (What is the meaning of secondary market?)

Ans. Meaning of Secondary Market: Secondary market means the market where buying and selling of previously issued securities takes place.

Q. 7. Describe the characteristics of secondary market. (Discuss the characteristics of secondary market.)

Ans. Characteristics of Secondary Market –

1. Deals only in previously issued securities, 

2. Generates liquidity,

3. This is a certain special place, 

4. It comes after the primary market, 

5, Purchasing of securities is done through brokers registered in Vikram Skanya Market, 

6, it does not directly create capital and 

7. Buying and selling of securities takes place from one investor to another.

Q.8. Differentiate between primary market and secondary market. (Differentiate between Primary market and Secondary market.)

Ans. Distinction between Primary Market and Secondary Market – Major points of difference between these two –

1. Issue, 2. Buying and selling, 3. Special place, 4. Exchange of securities, 5. Pricing, 6. Order of dealing, 7. Objective and 8. Duration. 

Q. 9. Explain the importance of capital market. (Discuss the importance of capital market.)

Ans. Importance of Capital Market—1. Helpful in capital formation, 2. Basis of industrialization, 3. Extensiveness of market, 4. Optimum utilization of capital and 5. Liquidity in securities.

Q. 10. Describe the major borrowers in the capital market. (Discuss the major borrowers in capital market.)

Ans. Major Borrowers in Capital market—1. Individuals and/or unincorporated entities, 2. Business entities, 3. Public entities or undertakings and 4. Governments.

Q. 11. Mention the major suppliers of funds in the capital market. (Explain the major suppliers of funds in the capital market.)

Ans. Major suppliers of Funds in the Capital Market: 1. Individual investors, 2. Institutional investors, 3. Bank finance etc. 4. Specialized financial institutions.

Q. 12. What is the meaning of money market? (What is meaning of money market?) 

Ans . Meaning of Money Market: Money market means a market in which short-term funds are traded.

Q. 13. Write the characteristics of money market. (Write the characteristics of money market.)

Ans. Characteristics of Money Market – 1. Short-term securities are bought and sold, 2. Excessive liquidity is found in it, 3. It is a group of many sub-markets, 4. It is a major part of the financial market, 5. Most of the transactions take place over telephone, 6. Transactions are done through brokers or intermediaries, 7. Establishes balance between short-term financial supply and short-term financial demand and 8. There are two forms of money market – (a) Organized money market and (b) Unorganized money market.

Q. 14. Describe the importance of money market. (Discuss the importance of money market.)

Ans. Importance of Money Market—1. Provides opportunity for short term investment, 2. Provides liquidity to short term investment, 3. Meets the short-term financial needs of financial institutions, 4. Implements the economic policy of the Reserve Bank, 5. Makes funds available for both national and international businesses, 6. Provides security to the instruments issued. 2. Helps companies earn profits on their idle or surplus funds in the short term and 8. Makes short-term financing easier for the government, banks, industrialists, etc.

Q. 15. Write the parts of money market. (Write the components of money market.)

Ans. Components/Instruments of money (Market)- 1. Usury currency, short notice loan, 2. Treasury distress, 3. Commercial bill, 4. Certificate of deposit and 5. Commercial paper.

Q. 16. Differentiate between capital market and money market. (Differentiate between capital market and money market.) 

Ans. Distinction between Capital Market and Money Market – The main points of difference between these two are – 1. Meaning, 2. Duration, 3. Parts, 4. Objective, 5. Liquidity, 6. Security element. , 7, control and S. region. 

Q. 17. What are the parts of capital market?

Ans. Capital market participants are individuals/institutions (including governments) who transact long-term funds in the form of capital or for capital. Stock Exchange Market Commercial banks, co-operative banks, savings banks, development banks, insurance companies, investment trusts and companies are important parts of the capital market. 

Q. _ 18. Write the characteristics of Indian capital market.

Ans. 1. Buying and selling of long term capital takes place in the capital market.

2. Money market activities can also be included in the capital market.

3. Scamp exchange market, commercial banks, savings, insurance companies, investment trusts etc. are important parts of the capital market.

Q. 19. Write the importance of capital market.

Ans. 1. A developed capital market is providing significant support to the development of joint stock companies.

2. Helps adventurous investors by pooling capital resources and providing them resources.

3. Provides an excellent medium for attracting funds and investing them globally.

4. Capital market helps in the economic development of the country by collecting small and scattered savings.

Q. 20. What do you understand by stock?

Ans. Stock is a broad term which includes all types of shares, debentures and bonds on which the entire value accrues to the company and which are duly bought and sold in the stock market.


Q.1. Explain what is ‘money market’. (What is the ‘Money Market’? Explain it.)

Ans. Money market is a center or market in which money and short-term financial assets, which are close counterparts of money, are taken and given. In the money market, bills of exchange, promissory notes and short-term bills are called near money.

Q. 2. Describe the parts and structure of money market. (Explain the composition and constituents of Money Market.)

Ans. The money market is not an organized market, but is made up of several markets, each of which deals in different types of short-term loans. Additionally, each currency market has various smaller markets. Therefore, it cannot be said broadly about the formation of the money market. We only describe the major components of the money market, which are common to all money markets, which are as follows –

1. Short notice loan market (Call money market)

2. Acceptance market

3. Bill market.

Therefore, these three markets that make up the money market can be combined into one market. And it can be called discount market.

Q.3. Explain the characteristics of developed and underdeveloped money markets. 

Ans. Pro. S. N. Sen has explained the characteristics of developed money markets in his famous book ‘Central Banking in Semi-Developed Money Markets’. The absence of one or more of these characteristics turns a money market into an underdeveloped money market. 

In every country, there is a money market, some of which are developed and some which are underdeveloped. 

Some basic characteristics are necessary for the formation of a developed money market. 

Like- 1. Highly organized commercial banking system

2. Presence of Central Bank

3. Availability of proper credit instruments

4. Existence of a number of sub-markets 

5. Availability of ample resources

6. Other contributory factors

Q.4. What is the importance of money market? (What are the advantages of Money market?)

Ans. Money market is an important institution in the modern economy. Although this institution has developed along with the industrial and commercial progress and is also the result of their progress, yet it (the money market) has also greatly influenced the development of industry and commerce.

1. Providing finance to industry and commerce (Financing of Industry and Commerce) 

2. Investment of short term funds

3. Help to the Central Bank

4. Help to Government.

Q.5. Explain the nature of capital market and its various parts. (Discuss the nature and constituents of Capital Market.)

Ans. The participants in the capital market include the government, individuals and institutions, who trade long-term bonds as capital or for capital. Sectors: Stock market, commercial banks, co-operative banks, savings banks, development banks, insurance companies, investment trust companies are important parts of the capital market.

Like the money market, there are three parties in the capital market, namely, suppliers of loan funds, borrowers (parties demanding capital) and intermediaries. These intermediaries deal on behalf of the party giving capital and the party receiving capital.

In the capital market, business firms raise capital through various types of shares and letters of credit. It is very important for the capital market to provide marketability of securities effectively, because investors will show enthusiasm in providing loans only when they can easily sell their debentures and bills in the capital market. Markets in developing countries are less developed.

Q.6. Explain the importance of capital market. (Clarify the importance of Capital Market.)

Ans. The growth rate of a country is influenced by long-term investment and capital formation, among other things. Capital formation is a major condition for collection, growth and channelization of funds for investment. In fact, the capital market makes an important contribution in collecting capital resources and making them available to courageous investors.

A developed capital market provides an excellent medium for attracting and investing funds globally.

As a result of increasing size of industrial units, economy based on different levels and technological development of large business entities, a situation has arisen in which the funds available with an individual or group of individuals are not sufficient as per the demand of investment. 

A developed capital market can solve this problem of shortage of funds. The capital market collects small and dispersed savings and increases the availability of funds for investment. Thus, on the one hand, the rapid growth in joint stock companies has developed the capital market to a great extent, while on the other hand, the capital market has developed the joint stock companies.

Has played an important role in the development of companies. A developed capital market also provides small savers with excellent opportunities for profitable investment.

Q.7 Discuss the nature of Indian capital market. (Explain the nature of Indian money market.)

Ans. Like the money market, organized and unorganized sectors are also found in the Indian capital market. In the organized sector, the demand for capital comes mostly from the bodies and government and semi-government institutions, which is mostly supplied by domestic savings, investment banks, trusts, insurance companies, financial corporations, government and international financial agencies.

The main capital supply in the unorganized sector is by local bankers and moneylenders. Whereas in another organized sector the demand for capital is mainly for productive investment, in the unorganized sector a large part of the demand for funds is for consumptive purposes. 

Mostly it is seen that the demand which is not supplied in the organized sector, is supplied by the unorganized sector. Therefore, like the unorganized money market, there is variation and multiplicity in interest rates in the unorganized capital market and often inequality is also found in the interest rates.

Government control is more visible in organized sectors, but unorganized sectors are often outside the range of government control. Along with this, the number of institutions in the organized sector is increasing, and public sector financial institutions account for a large part of the business in this sector, and government control in this organized sector is increasing significantly in the last years. Is.

Q. 8. What is meant by stock market? (Explain Stock Exchange.) 

Ans. Stock market is an organized market where different types of securities are bought and sold. These securities are those which are listed in the stock exchange and which have already been issued by some institution. 

Such as shares and debentures issued by public companies, bonds issued by government and municipality etc. and securities issued by various initiatives. Transactions of securities in the stock market are done according to certain rules for investment or speculation.

According to the Securities Contracts (Regulation) Act 1956, “Stock Exchange means an organization or institution of persons, whether incorporated or not, established to assist, regulate and control the buying, selling and dealing of securities.” “”

Q. 9. Write about the guidelines of ‘SEBI’ for new issuance. (Discuss the Guidelines by SEBI fresh issues.)

Ans. In June 2001, new issuance guidelines were given by ‘SEBI’ and now the control and regulation of capital issuance will be subject to the guidelines issued by ‘SEBI’ (SEBI) and to be issued in future, but the companies which are not allowed to issue capital issues. Before June 2001, permission was obtained from Capital Control (CCI) without being bound by SEBI guidelines.

Will be able to perform puja. Generally, SEBI generally adopts two types of positions for new issues –

First issue of existing companies. First issue by Grameen private companies.

Q. 10. Describe the rights and powers of ‘SEBI’. (Discuss Rights & Powers of SEBI.)

Ans. 1. To regulate stock exchange centers and their activities and capital market as per the need and circumstances.

2. Right to take over the rights of stock exchange centres.

3. Right to determine fees and expenses

4. To encourage education of investors and training of intermediaries in the securities market. 

5. Right to demand information from such specified institutions which are necessary for the functioning of the Board.

Q. 11. Explain the benefits of betting. (Clarify the benefits of Speculation.)

Ans. 1. Forecasting future price changes – On the basis of their knowledge and experience, speculators become so adept that they can make accurate predictions about the future prices of securities, due to which the concerned company and party can think about them. -They get opportunities to think, and they become alert in advance to face them.

2. To stop the fluctuations in the prices of securities – Speculators start making future deals of buying and selling by predicting the changes in future prices, as a result of which a balance is established in the demand and supply of securities and the prices fall. Excessive fluctuations are prevented.

3. To increase the marketability and liquidity of securities – Due to continuous buying and selling by speculators in stock exchanges, transactions in securities can be done easily at any time. As a result of such continuous and regular cup-selling of securities, their daily prices can be known, due to which the securities trader can easily evaluate his securities.

4. Bringing price parity in different markets – Speculators also prevent wide fluctuations in the price of securities at different places. If shares are bought in one market and sold from other markets. In this way, demand and supply become equal at different places and price changes do not remain very widespread.

Q. 13. Differentiate between betting and gambling. Distinguish between speculation & Gambling.)

Ans. Speculation and Gambling – Although both seem similar and in both the profit or loss is based on a future event which is uncertain. Even though the objective of betting is to earn quick profit like gambling, the two can be differentiated on the following grounds:

1. Betting is based on rational study and market. Its basis is knowledge and foresight about future changes in prices based on review of circumstances and trends.1. There is no such rational review in gambling. It is merely a matter of chance in the sequence of events and there is a complete lack of any scientific fact and logic.
2. Many economic objectives of betting are accomplished.2. Betting is completely legal.
3. The speculator bears the risk of loss on the basis of rational explanation. If the bookie also continues to make moves without thinking and without any logic, then he is involved in betting and gambling. There won’t be much difference.3. Gambling does no good to the economy. At the same time, gambling is an anti-social activity and the law. The gambler bears the risk of loss only on the basis of high and unwise probability, due to which an artificial circle of loss is created.


Q. 1. What do you understand by capital market? Explain its characteristics and importance. (What do you mean by Capital Market? Discuss its characteristics and importance.)

Ans. Capital market means the market where buying and selling or demand and supply of long-term finance is done. Capital market is the center where mutual adjustment of demand and supply of long-term capital takes place. It is the place where the loanable capital of a nation is stored and where long-term capital is dealt with. 

In this market, long-term capital is sought especially by private entrepreneurs who are looking for new industrial establishments or expansion of old industrial establishments. Long-term capital is supplied by the government, economic-government institutions, business and industrial companies etc. Whereas the lenders include commercial banks, industrial financial organizations and local moneylenders etc.

Characteristics of Capital Market 

1. Source of demand and supply of long-term capital. 2. Under the capital market, there is sale of shares, debentures etc. 3. Under this, long-term capital is dealt with on a large scale. 4. Capital market is organized and unorganized. 5. Capital market encourages financial sources. 6. Capital market provides support to industrial, agricultural, commercial, social and political development. 7. Capital market is the baro-meter of the memory and progressive economy of any country. 8. Government policy affects the capital market.

Importance of Capital Market – 

1. Capital market is the source of meeting finance requirement. 2. Capital market provides impetus to sources of finance. 3. Capital market encourages savings among the public.4. The Reserve Bank of India controls credit in the capital market. 5. Capital market provides impetus to the country’s agriculture, industry, business activities, social and political progress. 6. Important parts of capital market include local moneylenders, commercial banks and stock market. 

Q. 2. Explain money market. Explain its various parts and characteristics. (Explain Money Market. Discuss its different components and characteristics.) 

Ans. Money market which is essentially a pool of short-term capital. According to Nadler, Heller and Shipman – Money market is “the center where the demand and supply of short-term capital are mutually adjusted. The meaning of money market does not indicate any place. 

This word is indicative of the entire process through which short-term capital is invested by giving a gift and the method through which many financial deals are finalized. It is a place where the loanable capital of a nation and other nations is stored and where short-term capital or currency can be borrowed and lent quickly. Although generally only short-term loanable funds are lent and borrowed in the money market. 

In the broad sense, the term money market includes all those facilities which are used to finance all types of economic activities. Any significant transaction involving transfer of short-term or long-term payables takes place in the national or international money market only.” 

In the narrow sense, the money market includes only genuine credit transactions related to the money market, such as call loans and letters of credit like commercial paper, treasury paper, etc., in which personal relationships between the lender and the borrower are of little importance. Is.

The commercial bills which are bought and sold in the money market are all such authentic short-term loans and letters of credit in which personal relationships between borrowers and lenders have no importance. Both parties meet each other through traders and brokers. 

Commercial bill market, short term treasury bill market and call money market are all parts of the money market, but the bankers’ acceptances market is the most important part of the money market. It is an essential and important part. Domestic and foreign trade is financed through short-term capital in the bank acceptance market and commercial bill market. 

Government debentures are bought and sold through the treasury hundi market. Existing and new debt instruments are bought and sold in the instant money market. There is a deep relationship between all these different parts of the money market and one part has a deep impact on the other.

Q.3. What do you mean by stock marketing? Explain its importance and functions. (What do you understand by Stock Exchange? Discuss its functions and importance.)

Ans. In the eyes of common people, “Skandha Vipani” is used to mean the temple of Lakshmi instead of earning money. But in reality this notion is illusory. Just as there are different markets for different goods. Similarly, there is a market for stocks, shares, debentures and other securities which is called stock market. 

Stock market means a permanent and well-organized market, where various types of shares, debentures and government securities of joint stock companies are bought and sold. In India, they are also called “speculation market” or “share market”. Following are the main definitions of stock marketing:

1. Dr. K. l. According to Garg, “Stock exchange market is that market where buying and selling of various types of industrial or economic securities like shares of a joint stock company, debentures, government debentures, municipal and other institutions debentures and bonds etc. takes place. “

(“Stock Exchange may be defined as a forum, a mandi or market for the purchase and sale of industrial and financial securities such as shares and debentures of public companies Govt. papers, Municipal and other bonds and debentures.”-Dr. K.L. Gard)

2. According to the Securities Contracts (Regulation) Act 1956 [Section 2 (i)], “Stock exchange market means a community of persons who may or may not be incorporated but whose purpose of formation is to facilitate the buying and selling of securities and their related transactions.” To provide assistance and to control and regulate trade.”

[“Stock Exchange means any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying selling, or dealing in securities.”-The Securities Contract Act. 1956 sec 2 (i)]

3. Charles W. According to Gerstenberg, “Squad exchange is an organized bid market where buyers and sellers come together through their brokers to trade securities that are scheduled on that exchange and a market is maintained for non-scheduled securities.” “

(“The Stock Exchange are organised auction markets where buyers and sellers come together, through their brokers, to effect transactions in securities admitted to listing on the exchange and unlisted securities for which a market is maintained.”Charles W. Gresterberg)

4. According to Hartley Withers, “The stock exchange market is like a big warehouse where various securities are bought and sold at fixed prices.”

(“A Stock Exchange is something like a vast warehouse where securities are taken away from shelves and sold across the counters at a fixed price in a catalogue which is called the official list.”-Hartley Withers)

5. In the words of Poyle, “A stock exchange market is a market place where securities which are registered at that place can be bought and sold for either exchange or speculation.” (“Stock Exchanges are market places where securities that have been listed there on may be bought and sold for either investment or speculation.” — Pyle)

Based on the above definitions, the following are the main characteristics of the exchange market –

1. Organized Market: The currency exchange market is an organized market.

2. Authorized Members – Every stock exchange has its own authorized members who are called followers. He buys and sells securities for his clients on commission basis.

3. Rules and Regulations – Stock exchange market is a market where the ordering and sale of securities is subject to the rules and code of conduct of that stock market. 

4. Sale and Purchase of Securities – Ordering and selling of industrial and financial securities takes place in the stock exchange market. Which are issued by joint stock companies, port trusts, public interest institutions or government institutions.

Q.4 . Role of Securities and Exchange Board of India (SEBI) What is Indian Capital Market? Explain its functions and current activities.

(What is the Role of SEBI in Indian Capital Market? Discuss its function and present operations.)

Ans. Securities and Exchange Board of India (SEBI) :

Role of SEBI – Indian capital market has made promising progress during the last decade. As a result of the economic liberalization policies of the government, public interest in the capital market has increased. The Securities and Exchange Board of India (SEBI) was established on April 12, 1988 as an administrative body to maintain investor confidence in the capital market. 

It was given statutory status by an ordinance on January 31, 1992. From April 4, 1992, the work of ‘Sevi’ has started operating under a separate law and it has got more extensive legal powers and its scope of work has expanded. The Board (SEBI) is managed by six members, including a Chairman. 

(which is nominated by the Central Government), two members from among the officers of the Central Ministries having knowledge of finance and law, one member from among the officers of the Reserve Bank of India and the other two members are nominated by the Central Government. . Its headquarters is in Mumbai.

Functions of SEBI-

1. To protect the interests of investors in the securities market and to develop the securities market through appropriate measures.

2. To regulate the business of stock exchanges and any other securities market. 

3. To regulate the work of stock brokers, sub-brokers, share transfer agents, trustees, merchant bankers, underwriters, portfolio managers etc. and register them. 

4. To register collective investment schemes including mutual funds.

5. To encourage self-regular organizations.

6. To eliminate unfair trade practices related to securities markets.

7. To train people associated with the securities market. Prohibition of inside trading in securities.

8. To inspect the activities of various organizations operating in the securities market. 

Q.5 . Throw light on National Stock Exchange of India Limited. [Throw Light on National Stock Exchange of India Limited (NSEI).]

Ans. National Stock Exchange of India Limited is a new automated stock exchange whose basic objective is to provide securities trading services at the national level. It was established as a non-profit making public company in November 1992 on the recommendations of the Pherwani Committee. 

It is a major chain marketing company of India whose head office is located in Mumbai and it is currently working in about 400 cities and towns. It deals in shares, debentures, bonds etc. of various companies and government securities. Its main promoter is the Industrial Development Bank of India. Apart from this, its promoters include Industrial Finance Corporation of India (IFCI), General Insurance Corporation (GIC), Life Insurance Corporation of India (LIC), Industrial Credit and Investment Corporation (ICICI), S. B. I. Capital Market etc. 

Altogether 21 financial institutions are its promoters. The manner of dealing in this marketing is such that there is a high level of transparency in its dealings and at one time all the buyers and sellers across the country can participate in buying and selling. Automatic Trade Matching System is used in this and every member can do the buying and selling transactions while sitting in his office at a very economical price. 

Very Important Questions

Q. 1. Write the functions of money market.

Ans. 1. To increase the profits of investors and financial institutions by providing profitable investment opportunities for short-term savings funds. 2. To help in providing liquidity to the money market funds and investments of the entire country. 

Q. 2. Define money market. (Give the definition of money market.)

Ans. Definition of money market: Money market is that market where taking and giving of short term loans takes place or short term loans are made available. The market is a very active place in which financial people buy and sell monetary assets with the aim of generating liquidity as their normal business or main business.

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