Call money market

Call money market is a short-term money market is an essential part of Indian Money Market that allows for large financial institutions to borrow and lend money at interbank rates. These loans are short and last no longer than two weeks. Brokerages usually use call money markets to cover margin accounts. Here surplus funds are traded on a daily basis. The money market is a market for short-term financial assets that are money substitutes. In this market, money lent for one day is known as "Call Money" and money lent for more than one day (but less than 15 days) is known as "Notice Money." Term money is money that has been lent for 15 days or more on the interbank market.

Participants in the call money market include banks and other entities designated by the RBI.Scheduled commercial banks (excluding RRBs), co-operative banks (other than Land Development Banks), and Primary Dealers (PDs) can participate in the call/notice money market as both borrowers and lenders. As banks are the major participants Call Money Market is also known as the interbank call money market. Banks with excess funds will lend to other banks.

Banks borrow for following purpose:

• To cover the gaps or temporary mismatches in funds

• To meet the CRR and SLR as stipulated by the RBI

• To meet sudden demands for funds

* Call money allows banks to earn interest on their excess funds, which is known as the call money rate (call loan rate/call rate).

* It consists of overnight money as well as money available on short notice for up to 14 days.

* The call money market primarily serves to rebalance banks' and other participants' short-term liquidity positions.