Unorganised Money Market

  • 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

      • 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

The unorganised money market in India may be divided into three differing categories:

Unregulated Non-Bank Financial Intermediaries

      • 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

Indigenous bankers

      • 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

Money Lenders

      • They constitute the most localised form of money market in India and  operate in the most exploitative way