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___________ refers to short-term loans that banks and financial institutions lend to each other in the money market.
- a)Repo
- b)Commercial Paper
- c)Treasury Bills
- d)Call Money
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
___________ refers to short-term loans that banks and financial instit...
Call Money represents short term loans with no fixed maturity, commonly used among financial institutions for managing short term liquidity.
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___________ refers to short-term loans that banks and financial instit...
Understanding Call Money
Call money refers to short-term loans that banks and financial institutions lend to each other in the money market. This type of financing plays a crucial role in maintaining liquidity in the banking system.
Key Characteristics of Call Money:
Importance in Banking:
In conclusion, call money is an essential component of the money market, facilitating short-term funding among banks and ensuring the smooth functioning of the financial system. Understanding its dynamics is vital for anyone preparing for bank examinations.
Call money refers to short-term loans that banks and financial institutions lend to each other in the money market. This type of financing plays a crucial role in maintaining liquidity in the banking system.
Key Characteristics of Call Money:
- Short-Term Duration: Call money loans are typically for a very short period, ranging from overnight to a few days (usually up to 14 days).
- Interest Rates: The interest rates on call money are determined by the demand and supply of funds in the money market, and they can fluctuate significantly.
- Purpose: Banks utilize call money to manage their day-to-day liquidity needs, ensuring they meet statutory requirements and customer withdrawals.
- Participants: The primary participants in the call money market are commercial banks, financial institutions, and sometimes mutual funds.
Importance in Banking:
- Liquidity Management: Call money helps banks manage their liquidity effectively, balancing their assets and liabilities.
- Stabilizing Interest Rates: It aids in stabilizing the short-term interest rates, influencing overall monetary policy.
- Market Indicator: The call money rate is often seen as an indicator of the liquidity condition in the banking sector.
In conclusion, call money is an essential component of the money market, facilitating short-term funding among banks and ensuring the smooth functioning of the financial system. Understanding its dynamics is vital for anyone preparing for bank examinations.
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___________ refers to short-term loans that banks and financial institutions lend to each other in the money market.a)Repob)Commercial Paperc)Treasury Billsd)Call MoneyCorrect answer is option 'D'. Can you explain this answer?
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