Reforms in Call Money Market of India

Abstract:
Call money market is that part of the national money market where the day to-day surplus funds, mostly of banks,
are traded in. Mostly the call money market helps the banks to borrow the money without collateral from other
banks to maintain the cash reserve ratio (CRR) with RBI 1.The Call money market has undergone significant changes
in the past few decades, this paper discusses about few of the major reforms happened in the Call Money Market.

Keywords: Cash reserve ratio (CRR), Call Money Rate

INTRODUCTION:
Call Money Market2
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 into
money quickly at low cost and provides an avenue
for equilibrating the short-term surplus funds of
lenders and the requirements of borrowers. The
call/notice money market forms an important
segment of the Indian Money Market. Under call
money market, funds are transacted on an overnight
basis and under notice money market, funds are
transacted for a period between 2 days and 14 days.
REFERENCES:
Table 15: Call Money Rate on Sep 04, 2020
REFERENCES:
[1][4] Bhole L.M., Mahakud Jitendra. Financial
Institutions and Markets (Fifth ed.). New Delhi: Tata
McGraw-Hill Education Pvt Ltd. p. 603. ISBN 978-
0-07-008048-5.
[2],[3] RBI, Master Circular on Call/Notice Money
Market Operations July 1, 2015
[5] RBI, Weekly Statistical Supplement Sep 04,
2020
Reforms in call money market

Participants3 [6] [7] Chapter 3, The Historical Growth of

the Indian money market, Shodhganga
Scheduled commercial banks (excluding RRBs), co-
inflibnet
operative banks (other than Land Development
Banks) and Primary Dealers (PDs), are permitted to
[8] [9] [11] Money market reforms in India,
participate in call/notice money market both as
borrowers and lenders. GkToday, June 28, 2017

Call Money Rate4 [10] [12] Golaka C Nath & Payal Ghose for,
The India call money market, Rakshitra,
The rate of interest paid on call loans is known as call CCIl, Jan 2017
rate. The call rate is highly variable from day to day,
and often from hour to hour. It is very sensitive to Reforms in call money market
changes in demand for and supply of call loans.
April 1991 The Money Market Mutual Fund
(Per cent)
scheme was announced where banks and
2019 2020 their subsidiaries could set up MMMFs.6
Item/Week Aug. Jul. Aug. Aug. Aug. Aug.
Ended 30 31 7 14 21 28 April, 1991 Lendable funds entities of at
1 2 3 4 5 6 least Rs. 20 Crores per transaction could
Call Money entry in to the call/notice money market and
Rate
(Weighted
5.36 3.46 3.42 3.44 3.43 3.43 commercial bill rediscount market as lenders
Average) through DFFII only.7
Table 15: Call Money Rate on Sep 04, 2020
1992 and 1996 RBI respectively introduced
repo rate and reverse rate.8

1997 RBI was revised to take up NBFCs

under its regulatory framework.9

October 1998, RBI announced that non-

banking financial institution should not
participate in call money market and it
should be purely based on interbank
operating segment.10

June 2000, liquidity adjustment facility

which was introduced by RBI. It was
operated through fixed and reverse repo
rates. Interest rates were establishment as
important monetary instrument and greater
flexibility.11

December 9, 2000 RBI formed technical

group on eliminating out non-banks from
call/notice money market which included
prototype from RBI, non-banks and banks.12