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Call /Notice / Term Money

 

The call/notice/term money market facilitates lending and borrowing of funds between banks and entities like Primary Dealers. An institution which has surplus funds may lend them on an uncollateralized basis to an institution which is short of funds. Money market transactions are categorized as follows:

  • Borrowing/Lending for 1 day is known as Call Money
  • Borrowing/Lending for 2-14 days is known as Notice Money
  • Borrowing/Lending for more than 14 days is known as Term Money

The interest rates on such funds depend on the surplus funds available with lenders and the demand for the same which remains volatile.

This market is governed by the Reserve Bank of India which issues guidelines for the various participants in the call/notice money market. The entities permitted to participate both as lender and borrower in the call/notice money market are Scheduled Commercial Banks (excluding RRBs), Co-operative Banks (other than Land Development Banks) and Primary Dealers (PDs).


Prudential Limits for Transactions in Call/Notice Money Market
Sr. No. Participant Borrowing Lending
1 Scheduled Commercial Banks On a fortnightly average basis, borrowing outstanding should not exceed 100 per cent of capital funds (i.e., sum of Tier I and Tier II capital) of latest audited balance sheet. However, banks are allowed to borrow a maximum of 125 per cent of their capital funds on any day, during a fortnight. On a fortnightly average basis, lending outstanding should not exceed 25 per cent of their capital funds. However, banks are allowed to lend a maximum of 50 per cent of their capital funds on any day, during a fortnight.
2 Co-operative Banks Outstanding borrowings of State Co-operative Banks/District Central Co-operative Banks/ Urban Co-operative Banks in call/notice money market, on a daily basis should not exceed 2.0 per cent of their aggregate deposits as at end March of the previous financial year. No limit.
3 Primary Dealers PDs are allowed to borrow, on average in a reporting fortnight, up to 225 per cent of their net owned funds (NOF) as at end-March of the previous financial year. PDs are allowed to lend in call/notice money market, on average in a reporting fortnight, up to 25 per cent of their NOF.

Furthermore, the permitted entities may decide on an entity-wise exposure limit depending on their own internal assessment of the said entity.

The average daily turnover in the call money market is around Rs. 12,000-16,000 Cr every day and trading occurs between 9 am to 5 pm on Monday to Friday and 9 am to 2 pm on 1st, 3rd and 5th Saturdays.

The trades are conducted both on telephone as well as on the NDS Call system, which is an electronic screen based system set up by the RBI for negotiating money market deals between entities permitted to operate in the money market. The settlement of money market deals is by electronic funds transfer on the New Generation - Real Time Gross Settlement (NG-RTGS) system operated by the RBI. The repayment of the borrowed money also takes place through the NG-RTGS system on the due date of repayment.

STCI PD has access to NDS-Call as well as NG-RTGS system. We borrow/lend funds on electronic platform as well as over telephone. Clients interested in placing funds under Call/Notice/Term money may contact our Funding Desk on 022 66202213/232.

 

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