BANKING AFFAIRS

Detailed explanation-1: -Banks often use the interbank call money market to meet reserve requirements. Other entities use short term loans from the interbank call money market to manage various liquidity needs. Loans in the interbank call money market are typically transacted based on the London Interbank Offer Rate (LIBOR).

Detailed explanation-2: -The money market primarily facilitates lending and borrowing of funds between banks and entities like Primary Dealers (PDs). Banks and PDs borrow and lend overnight or for the short period to meet their short term mismatches in fund positions. This borrowing and lending is on unsecured basis.

Detailed explanation-3: -Call money allows banks to earn interest, known as the call loan rate, on their surplus funds. It consists of overnight money and money at short notice for a period of upto 14 days. The call money market essentially serves the purpose of equilibrating the short-term liquidity position of banks and other participants.

Detailed explanation-4: -Call money is a very short-term bank loan that does not contain regular principal and interest payments. It is often used by brokerage firms to finance margin accounts. Call money does not have to follow a fixed schedule, nor does the lender have to provide any notice of repayment. Was this answer helpful? 0.

Detailed explanation-5: -Call money is minimum short-term finance repayable on demand, with a maturity period of one to fourteen days or overnight to a fortnight. It is used for inter-bank transactions. The money that is lent for one day in this market is known as “call money” and, if it exceeds one day, is referred to as “notice money."