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Interbank Call Money Market

Interbank Call Money Market:

The RBI is likely to launch the pilot of central bank digital currency (CBDC) for transactions for interbank borrowing or call money market.

  • Money Market basically refers to a section of the financial market where financial instruments with high liquidity and short-term maturities are traded.
  • It includes buying and selling of securities of short-term maturities of one year or less, such as treasury bills and commercial papers.
  • It is used by many participants, including companies, to raise funds.
  • The money market is considered a safe place to invest due to the high liquidity of securities.
  • Call Money is also referred to as the money at call.
  • It is a short-term loan that is due to be paid immediately in full as and when demanded by the lender.
  • Unliketerm loans, call money loan does not have a defined schedule of payment and maturity.
  • Furthermore, the lender of the call money need not provide prior notice to the borrower about the repayment.
  • Interbank Call Money Market is a short-term money market which allows large financial institutions to borrow and lend money at interbank rates, the rate of interest that banks charge when they borrow funds from each other.
  • The loans in the call money market are very short, usually lasting no longer than a week.
  • These loans are often used to help banks meet reserve requirements.
  • It is not exclusively used by banks.
  • Interbank call money market customers can include other financial institutions, mutual funds, large corporations, and insurance companies.