20-03-2017, 02:39 PM
A short-term money market, which allows large financial institutions, such as banks, mutual funds and corporations, to borrow and lend money at interbank rates. The loans in the money market of the call are very short, usually lasting no more than a week and are often used to help banks meet the reserve requirements.
This is the most active and sensitive part of the organized money market. It focuses mainly on Bombay. Calcutta and Madras are the market in Bombay being the most important. These are one day loans (called call or money calling loans) that may or may not be renewed the next day. Participants are mostly banks. Therefore, it is also called interbank money market called. The borrower's side is limited exclusively to banks, which are temporarily unfunded. On the side of lending, too, there are mostly banks with temporary cash surpluses.
As special cases, some other financial institutions like the LIC and UTI are also allowed to put in the call of their short term funds and earn interest in them. All others have to keep their funds in term deposits of a minimum of 15 days with the banks in order to earn interest. For, banks are prohibited from paying interest on deposits made for less than 15 days. These deposits are treated as current account deposits.
In the past, companies (financial or non-financial), as well as quasi-government entities and people with large short-term surpluses, could put those funds in contact with banks. This money from businesses and individuals, known as "house money", used to be a major source of money from the call for banks. Financial intermediaries used to act as intermediaries between borrowing banks and credit houses. All this has changed now. As of March 1978 banks have been banned from paying intermediation for the organization of call loans for them.
