The Call / Notice Money market forms an important segment of the Indian Money Market. The Money Market is a market for short-term financial assets that are close substitutes of money. The most important feature of a money market instrument is that it is liquid and can be turned over quickly at low cost and provides an avenue for equilibrating the short-term surplus funds of lenders and the requirements of borrowers. Under Call Money market, funds are transacted on overnight basis and under Notice Money market, funds are transacted for the period from 2 days to 14 days.
Participants in call/notice money market currently include banks (excluding RRBs) and Primary Dealers (PDs), both as borrowers and lenders
It is mandatory for all Negotiated Dealing System (NDS) members to report their Call / Notice money market deals (other than those done on NDS-CALL) on NDS. Dealings in Call / Notice money through screen-based negotiated quote-driven system (NDS-CALL) launched since September 18, 2006 do not require separate reporting.
Features:
- The borrowings are unsecured
- The interest rates depend on the demand and supply of the short term surplus/ deficiency amongst the interbank players.
- It serves as an outlet for deploying funds on short term basis to the lenders having steady surplus of funds.
Banks borrow in this market for the following purpose:
- To fill the gaps or temporary mismatches in funds.
- To meet the CRR mandatory requirements as stipulated by the Central bank.
To meet sudden demand for funds arising out of large outflows. Thus call money usually serves the role of equilibrating the short-term liquidity position of banks.