WELCOME TO MY

PRESENTATION

Presentation Topic:
Call Money
Presented To :
Professor Shibli Rubayat Ul Islam
Dean, Faculty of Business Studies
Chairman, Department of Banking and Insurance
University of Dhaka

Presented By:
Arup Kumar Saha
ID – 51429038
Course Name – Principle and Practices of Banking
Semester: Summer 2016
What is Call Money?

• The call money refers to the money which is for short period loans;
say one day to fourteen days. These loans are repayable on demand
at the option of either the lender or the borrower.
Call Money Market

• Helps Bank to manage short-term deficit or surplus of money.

• Provides funds that can be used to conduct transactions between

banks, or with other money market dealers .

• The call money loan essentially works in the same manner as a day
to day loan.
Participants of Call Money Market

1. All Commercial Banks.

2. State Owned Banks.
3. Foreign Banks.
4. Specialized Banks.
5. Non-Bank financial institutions.
6. Authorized Dealers.
Call Rates

• The rate of interest paid on call loans is known as the call rate. The
call rate is highly volatile and varies from day to day, hour to hour.
It varies from center to center and is very sensitive to the supply
and demand of call loans.
Advantages of call money

• High Liquidity
• High Profitability
• Maintenance Of SLR
• Safe And Cheap
• Assistance To Central Bank Operations
Drawbacks of call money

• Uneven Development
• Lack Of Integration
• Volatility In Call Money Rates
Reason for Call Rate Volatility

Volatility of the call rates can be attributed to the following factors:

1) Large borrowings on certain dates by banks to meet the CRR and SLR
requirements and sharp reduction in the demand of call money once needs
are meet.
2) The credit operations of certain banks tend to be much in excess of their own
resources. These banks over extended credit position treat call market as a
source of funds for meeting disequilibrium in their sources and uses of funds.
3) The occasional factors in the market also affect the volatility.
4) The withdrawal of funds by institutional lenders to meet their business needs
and by the corporate sector for payment of advance tax leads to steep increase
in the call rate.
Reason for Call Rate Volatility

3) The liquidity crisis in money market also contributes to call rate volatility.
6) The mismatch between asset liability of commercial banks arising out of
massive demand for non-food credit as against sluggish growth in bank
deposits is another relevant factor.
7) Activity in forex market and call money markets have inter linked each other.
8) The structural deficiencies in the banking system and the practice of banks to
window dress their deposits also have been important contributing factors in
this context.
End of period Call money market's weighted average interest rates on

2016 Borrowing Lending

January 3.90 3.90

February 3.73 3.73

March 3.68 3.68

April 3.68 3.68

May 3.67 3.67

June 3.70 3.71

Any Question?