BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It is an overnight loan in the money market
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It is loan of above 1 day to 14 days in the money market
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It is loan of above 14 day to 364 days in the money market
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None of the above
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Detailed explanation-1: -When banks face cash shortage, they borrow from other commercial banks for a short period of 1-14 days. When banks borrow for one day it is known as call-money . Any money borrowed for more than 1 day but maximum of 14 days is known as notice money. Was this answer helpful?
Detailed explanation-2: -Where money is borrowed or lend for period between 2 days and 14 days it is known as ‘Notice Money’. And ‘Term Money’ refers to borrowing/lending of funds for period exceeding 14 days.
Detailed explanation-3: -Under call money market, funds are transacted on overnight basis and under notice money market, funds are transacted for the period between 2 days and 14 days. 2.1 Participants in call/notice money market currently include banks (excluding RRBs) and Primary Dealers (PDs), both as borrowers and lenders (Annex I).
Detailed explanation-4: -An institution which has surplus funds may lend them on an uncollateralized basis to an institution which is short of funds. Money market transactions are categorized as follows: Borrowing/Lending for 1 day is known as Call Money. Borrowing/Lending for 2-14 days is known as Notice Money.
Detailed explanation-5: -Call money is a short-term, interest-paying loan from one to 14 days made by a financial institution to another financial institution.