What is Call Money in India?

By Ritika Pant|Updated : July 18th, 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 does not have to stick to a fixed schedule, and the lender doesn't provide any notice for reimbursement. 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 does not have to stick to a fixed schedule, and the lender doesn't provide any notice for reimbursement.

Call money is an important aspect of the Indian financial system. Banks collect interest using call money, known as the call loan rate. It is essential in scenarios when money is needed overnight or on the short statement for up to 14 days.
The notice or call money market is the most vital segment of the Indian capital market. Primary dealers (PDs) and banks can borrow and lend in the market, but non-bank parties like mutual funds, corporates, and financial institutions are only allowed to lend.

Features of Call Money

The features of Call money in India are listed below. It 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 What is 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.

    Lenders:

    • All India Financial Institutions
    • Co-operative Banks
    • Primary Dealers(PDs)
    • Scheduled Commercial Banks
    • Select Mutual Funds
    • Select Insurance Companies

    Borrowers:

    • Primary Deals(PDs)
    • Co-operative Banks
    • Scheduled Commercial Banks

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