Call and Short Notice Money

Call money refers to a money given for a very short-period. It may be taken for a day or overnight but not exceeding seven days in any circumstances. Surplus funds of the commercial banks and other institutions are usually given as call money. Banks borrow call funds for a short period to meet the Cash Reserve Ratio (CCR) requirements and repay back once the requirements have been met.
     Sometimes, individuals of very high financial standing may borrow money for a very short period to meet their business financial needs. The rates of interest is very low on call funds. The call money loans may be given for the purpose of dealing in the bullion market and stock exchanges.
      Another variation of call money is notice money which can be for a period upto 14 days.
      'Money at call and Short Notice' appears on the assets side of a bank balance sheet and represents temporary loans to bill brokers, stock brokers and other banks. If the loan is given for one day, it is called 'money at call' and if the loan cannot be called back on demand and will require at least notice of three days, for calling back, it is called 'money at short notice'. It also includes deposits repayable within 10 days or less than 15 days notice but in the inter-bank call money market. The rate of interest on which money is lent fluctuates every day, sometimes, very quickly (more than 25%-30%) depending upon the demand for and supply of money.

Comments

Popular Posts