- Before the government started the organised development of the money market in India, its unorganised form had its presence since the ancient times—its remnant is still present in the country
- Their activities are not regulated like the organised money market, but they are recognised by the government
Reasons for persistence of Unorganised Money Market in India
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- Lack of penetration and presence of the instruments of the organised money market
- There are many needful customers in the money market who are currently outside the purview of the organised money market
- Entry to the organised money market for its customers is still restrictive in nature— not allowing small businessmen
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The unorganised money market in India may be divided into three differing categories:
Unregulated Non-Bank Financial Intermediaries
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- These are functioning in the form of chit funds, nidhis (operate in South India, which lend to only their members) and loan companies
- They charge very high interest rates (i.e., 36 to 48 per cent per annum), thus, are exploitative in nature and have selective reach in the economy
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Indigenous bankers
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- These receive deposits and lend money in the capacity of an individual or a private firms.
- The non-homogenous groups under this category include Gujarati Shroffs, Multani or Shikarpuri Shroffs, Marwari Kayas, Chettiars
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Money Lenders
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- They constitute the most localised form of money market in India and operate in the most exploitative way
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