What is Call Money in India?

By Ritika Pant|Updated : November 22nd, 2022

Call money is a temporary monetary loan that must be paid in one go or instantly when the money lender asks for it. Call money is not subject to a set schedule, and the lender does not provide any notice of repayment. Call money is a short-term monetary loan that must be paid in full or immediately when the money lender requests it. It is not subject to a set schedule, and the lender does not provide any notice of repayment.

Call Money in India

Call money is an essential component of the Indian financial system. Banks charge interest on call money, which is known as the call loan rate. It is critical in situations where funds are required overnight or on a short statement for up to 14 days.

The most important segment of the Indian capital market is the notice or call money market. Although primary dealers (PDs) and banks can borrow and lend in the market, non-bank parties such as mutual funds, corporations, and financial institutions can only lend.

Features of Call Money in India

Call money differs from long-term loans as it does not have standard principal and interest payments. For more details, read the below points.

  • Brokers use this money as a small funding source to keep margin accounts open for customers who want to support their investments.
  • Funds are transferred swiftly; hence, it is the second most runny asset, following cash.
  • The interest rate, also known as margin rates charged on loans, differs according to the call money rate developed by banks.

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FAQs on Call Money in India

  • Call Money in India is a significant part of the market, which involves the daily trading of surplus funds. These are financial assets for a limited time and act as substitutes for money. The trading of loans occurs only for a short period, from 1 to 14 days. In this market, money lent for one day is known as Call Money.

  • The call money includes banks and other entities designated by the RBI as participants. Recently due to a new regulation, payment banks are permitted to participate in Call Money, being both lenders and borrowers.

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