2. CALL MONEY
• Call money is money loaned by a bank that must be repaid
on demand. Unlike a term loan, which has a set maturity
and payment schedule, call money does not have to follow
a fixed schedule, nor does the lender have to provide any
notice of repayment.
• Brokerages use call money as a short-term source of
funding to maintain margin accounts for the benefit of their
customers who wish to leverage their investments.
• The funds can move quickly between lenders and
brokerage firms.
3. CALL MONEY MARKET
Call money market is that part of the national
money market where the day- to-day surplus
funds, mostly of banks, are traded in.
The loans made in this market are of a short-
term nature, their maturity varying between
one day to a fortnight.
4. • 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.
• The nature of Call money market in different
countries varies from each other.
5. • Differences in institutional structures account
for differences in the nature, participants,
purposes or types of transactions in such
markets.
• All, however, have one common feature: They
deal in loans which have a very short maturity
and are highly liquid.
6. FEATURES OF CALL MONEY
• Short term finance.
• Themoney is lent for 1day.
• Theinterest rate paid on call money is
knownas the call rate.
• Schedule and repayment of loan is notfixed.
• Theloan can be called at any time, it is
riskier than other forms ofloans.
• It helps in meeting liquidity needs at short
notice
7. CALL MONEY MARKET IN INDIA
• The call loans in India are given : To the bill
market For the purpose of dealing in the
bullion markets and stock exchanges Between
banks, and Frequently to individuals of high
financial status in Mumbai for ordinary trade
purposes in order to save interest on cash
credits and overdrafts.
8. • Among these uses inter-bank use has been the most
significant and their use on stock exchanges and other
markets has been modest.
• Call loans in India have a maturity anywhere between
one day to a fortnight.
• While the call money market deals in overnight funds,
notice money market deals in funds for 2-14 days.
• Money at call and short notice in the balance sheets of
commercial banks is a highly liquid asset. Unlike in
other countries, call loans in India are unsecured.
9. • Money and credit situation in India every year is
subject to seasonal fluctuations.
• Unlike in other countries, transactions or trading
on the call money market is also believed to be
characterized by seasonal variations.
• The seasonal ups and downs are believed to be
reflected in the volume of money at call and
short-notice, and call money rates at different
times of the year.
10. • The seasonal nature of the call money market
would be reflected in two indicators:
• A decline in money at call and short notice
should be greater in the slack season than in
the busy season of a given year.
• An increase in money at call and short notice
should be greater in the busy season than in
the slack season.
11. PARTICIPATION
• Participants in the call money market are
• Scheduled commercial banks
• Non-scheduled commercial banks
• Foreign banks
• State, district and urban, cooperative bank
• Discount and Finance House of India (DFHI)
• Securities Trading Corporation of India (STCI)
12. CALL RATES
• The rate of interest paid on call loans is known
as the call rate.
• The call rate is highly variable from day to day,
and often from hour to hour.
• It varies from centre to centre also.
• It is very sensitive to changes in demand for
and supply of call loans.
13. CERTIFICATE OF DEPOSIT
• Certificates of deposit are short term deposit
instruments issued by banks and financial
institutions to raise large amount of money.
• This scheme was introduced in July 1989, to
enable the banking system to mobilize bulk
deposits from the market, which they can
have at competitive rates of interest.
14. FEATURES
• Who can issue Scheduled commercial banks
(except RRBs) and All India Financial
Institutions within their `Umbrella limit’.
• Maturity Min: 7 days Max : 12 Months (in case
of FIs minimum 1 year and maximum 3 years).
• Amount Min: Rs.1 lac, beyond which in
multiple of Rs.1 lac
15. Eligibility, Maturity, Issue Price
• The Certificate of Deposits may be issued at a
discount on face value.
• Banks and Financial Institutions are permitted
to issue these on floating rate basis. The
interest rate on floating rate Certificate of
Deposits will have to be reset periodically.
• Banks must keep Statutory reserve on the
issue price of Certificate of Deposits.
16. Transferability, Loss of Certificate,
Security
The physical Certificate of Deposits are freely
transferable by endorsement and delivery. In
case of loss of Certificate of Deposits,
duplicate certificate may be issued only after:
• - A notice is given in at least one news paper.
• - There has been lapse for 15 days from the
date of notice
• - Investor has to executes an indemnity bond
17. Advantages
• Certificate of deposits are the most convenient instruments to
depositors as they enable their short term surpluses to earn higher
return.
• CDs also offer maximum liquidity as they are transferable by
endorsement and delivery. The holder can resell his certificate to
another.
• From the point of view of issuing bank, it is vehicle to raise resource
in times of need and improve their lending capacity. The CDs are
fixed term deposits which cannot be withdrawn until the
redemption date.
• This is an ideal instrument for the banks with short term surplus
found to invest at attractive. Problems Hindering CD Market
• Absence of secondary mark