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No collateral security ids required in these transactions. . When money is borrowed or lent for more than a day up to 15 days. Intervening holidays are excluded for this purpose. it is called notice money. When money is borrowed or lent for a day. it is known as overnight call money. Call money market is a market for short funds repayable on demand and with a maturity period varying between one night to 15 days.
on a reporting Friday. Hence. . It is OTC market without involvement of brokers. once every fortnight on a Friday. Commercial banks borrow money from other banks to maintain a minimum cash balance known as CASH TRESERVE BALANCE (CRR). Call money is required mostly by banks. the banks have to satisfy CRR Which involves borrowing and lending in call money market.
Then the lender issues a cheque in favor of the borrower and borrower in turn issues call money borrowing receipt. the lender returns the duly discharged receipt. Borrower and lender contact each other over a phone call. When the loan is repaid with interest. After negotiations over the phone. the borrowers and lenders arrive at a deal specifying the amount of loan and the rat of interest. .
MIBOR( Mumbai interbank overnight averag) . It is highly volatile. There are two call rates: Inter bank call rate Lending rate of DHFI in call market. Interest rate paid on call money loans is known as call rate. It is freely determined by demand and supply forces. It varies from day to day. hour to hour and sometimes minute to minute.
It is based on rates pooled by NSE from a representative panel of 31 banks/institutions/primary dealers. This rate is used as benchmark rate for money market. The rates pooled are then processed to arrive at estimate of reference rats. NSE Mumbai launched MIBOR for overnight money markets. .
Liquidity conditions CRR and SLR Structural factors Investment policioes of NBFC Liquidity and gaps in FORX market. .
highly liquid highly profitable maintenance of SLR Safe and cheap Assistance to central bank .
Uneven development Lack of integration Volatility in call money rates .
. CP is a short term unsecured loan issued by a corporation typically financing day to day operation. Only company with high credit rating issues CP’s. CP is very safe investment because the financial situation of a company can easily be predicted over a few months.
Issuers ◦ Private companies ◦ Public sectors ◦ Nbfc Investors ◦ ◦ ◦ ◦ Individuals Banks Corporates NRI .
. Short term instruments with fixed maturity Certificate of unsecured corporate debt Issued at discount at face value Issuer promise to pay a fixed amount Can be issued directly by a company. investors or banks.
. Simplicity Flexibility Diversification Easy to raise long term capital High returns Movement of funds.