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What is meant by a fund?

Personal Finance & Money Asked on October 4, 2021

I read in the book Indian Economy by Ramesh Singh (in the chapter Indian Financial Market):

Money market fulfils the requirements of funds for a period of up to 364 days.

What is the meaning of "fund" and what does the sentence mean in simple language?

2 Answers

I found your book online. Here is that paragraph:

paragraph from textbook

With that context, it's clear that "funds" just means money. If you need money for just a few weeks or months, you go to the "money market" for it, for your short term funds. In contrast, if you need money for a long time (say to buy or build a big office building or factory) you go to the capital market. The word "requirements" in this paragraph doesn't mean rules or regulations, but simple need. A company needs or requires some money for whatever reason. How long will you need to borrow it for? That establishes which market you go to for it.

I expect the rest of the chapter will go into more detail about both of these markets and how they work, but the author chose to start with the fact there are two markets and this important distinction between them. As you read the rest of the chapter, this paragraph will make more sense to you.

Correct answer by Kate Gregory on October 4, 2021

"Funds" here is used as a synonym for money. Specifically funds means money used for a particular purpose (see the dictionary definition). In this case the money market is mostly tapped (or used) by banks to maintain their liquidity between long- and short-term liabilities. So "funds" here are referring to money specifically used by banks to manage their liquidity requirements. To understand banks' liquidity requirements please read the Basel funding requirements.

Answered by MD-Tech on October 4, 2021

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