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What is the primary function of the "Call Money Market"?
- a)Discounting commercial bills
- b)Granting loans against collateral
- c)Facilitating acceptance of bills of exchange
- d)Borrowing and lending short-term funds
Correct answer is option 'D'. Can you explain this answer?
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What is the primary function of the "Call Money Market"?a)Di...
Primary Function of the Call Money Market
The primary function of the Call Money Market is to facilitate borrowing and lending of short-term funds among financial institutions and banks.
Explanation
- Liquidity Management: The Call Money Market provides a platform for banks and financial institutions to manage their short-term liquidity needs efficiently. Institutions can borrow funds for a very short duration, typically one day, to meet their immediate cash flow requirements.
- Interbank Transactions: Banks use the Call Money Market to lend excess funds to other banks in need of funds. This market helps in maintaining the equilibrium of funds among financial institutions.
- Interest Rate Benchmarking: The rates at which funds are lent and borrowed in the Call Money Market serve as a benchmark for other short-term interest rates. It influences the overall interest rate structure in the financial market.
- Regulatory Compliance: The Call Money Market is regulated by the central bank of the country to ensure transparency and stability in the financial system. It helps in regulating the flow of funds and maintaining financial stability.
- Risk Management: Financial institutions use the Call Money Market to manage their overnight liquidity risk. By borrowing or lending funds in this market, institutions can optimize their cash positions and mitigate any unforeseen liquidity crunches.
In conclusion, the Call Money Market plays a crucial role in the financial system by providing a platform for short-term borrowing and lending of funds, influencing interest rates, and facilitating liquidity management among financial institutions.
The primary function of the Call Money Market is to facilitate borrowing and lending of short-term funds among financial institutions and banks.
Explanation
- Liquidity Management: The Call Money Market provides a platform for banks and financial institutions to manage their short-term liquidity needs efficiently. Institutions can borrow funds for a very short duration, typically one day, to meet their immediate cash flow requirements.
- Interbank Transactions: Banks use the Call Money Market to lend excess funds to other banks in need of funds. This market helps in maintaining the equilibrium of funds among financial institutions.
- Interest Rate Benchmarking: The rates at which funds are lent and borrowed in the Call Money Market serve as a benchmark for other short-term interest rates. It influences the overall interest rate structure in the financial market.
- Regulatory Compliance: The Call Money Market is regulated by the central bank of the country to ensure transparency and stability in the financial system. It helps in regulating the flow of funds and maintaining financial stability.
- Risk Management: Financial institutions use the Call Money Market to manage their overnight liquidity risk. By borrowing or lending funds in this market, institutions can optimize their cash positions and mitigate any unforeseen liquidity crunches.
In conclusion, the Call Money Market plays a crucial role in the financial system by providing a platform for short-term borrowing and lending of funds, influencing interest rates, and facilitating liquidity management among financial institutions.
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Community Answer
What is the primary function of the "Call Money Market"?a)Di...
The Call Money Market deals with call loans, where institutions borrow and lend short-term funds on a day-to-day basis.
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What is the primary function of the "Call Money Market"?a)Discounting commercial billsb)Granting loans against collateralc)Facilitating acceptance of bills of exchanged)Borrowing and lending short-term fundsCorrect answer is option 'D'. Can you explain this answer?
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What is the primary function of the "Call Money Market"?a)Discounting commercial billsb)Granting loans against collateralc)Facilitating acceptance of bills of exchanged)Borrowing and lending short-term fundsCorrect answer is option 'D'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about What is the primary function of the "Call Money Market"?a)Discounting commercial billsb)Granting loans against collateralc)Facilitating acceptance of bills of exchanged)Borrowing and lending short-term fundsCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is the primary function of the "Call Money Market"?a)Discounting commercial billsb)Granting loans against collateralc)Facilitating acceptance of bills of exchanged)Borrowing and lending short-term fundsCorrect answer is option 'D'. Can you explain this answer?.
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