Call Money Market

Call money market is that part of national money market where the day -to-day surplus funds ,mostly of banks,are traded in.The loan made in this market are of short term nature,their maturity varying between 1 day to a fortnight .As these loans are repayable on demand and at the option of either the lender or the borrower ,they are highly liquid,their liquidity being exceeded only by cash .Nature of this market varies from country to country.Differences in institutional structures account for differences in nature ,participants ,purpose or types of transaction in such markets.All have one common feature that they deal loans which have very short maturity(1 to 2 days ) and are highly liquid.

Call Money Market in US: In US there are two market which can be said to form the call money market.1. Federal funds market.and 2.Call money market proper.

Call Money Market in UK:In UK Call money market is consist of three part :1.clearing banks’ loans to discounted houses 2.inter-bank loans; 3.mobilization of surplus money by discount houses among themselves before they approach the Bank of England for financial accommodation.

Call Money Market in India:In India ,Call loans are are given:1.to the bill market ,2.for the purpose of dealing in the bullion market and stocks exchanges.3.between the banks and 4.frequently to the individual of high financial status for ordinary trade purpose in order to save interest on cash credit and overdraft.Among these uses ,inter bank use has been most significant and their use on stock exchanges has been modest.Call money is used in India for the purpose of adjustment of reserves ration,it is similar to federal funds in the US; to the extent that call loan are given to security brokers they are similar to the “outside ” inter banks loans in the UK.

Interest Rates :Interest rates in these market are market determined i.e. by the demand and supply of short term loans.

In India, 80% demand comes from the public sector bank and 20% comes from private and foreign sector banks.Then around 80% of funds are supplied by Financial institution such as IDBI and LIC and rest 20% comes from the banks.

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