Examkin

Question

Difficulty: HardMoney Market: Institutions and Instruments

Call Money represents an interbank short-term borrowing facility in the money market that allows commercial banks to lend and borrow surplus funds on an overnight or day-to-day basis to satisfy immediate liquidity reserve requirements.

Answer: Answer

Answer

The statement is True. Call Money is an essential money market instrument utilized by commercial banks for interbank overnight borrowing to maintain liquidity and regulatory cash reserve balances.
The statement is accurate because Call Money is a key short-term money market facility that facilitates day-to-day liquidity management between commercial banks.

Step-by-Step Solution

1
Identify the market classification and institutions involved.
Call Money is traded exclusively in the money market among commercial banks and financial intermediaries.
Money markets facilitate short-term debt instruments and immediate liquidity adjustments.
2
Examine the maturity profile and purpose of Call Money.
The borrowing duration ranges from overnight up to 14 days, primarily aimed at resolving temporary cash deficits.
Commercial banks must satisfy central bank statutory cash reserve requirements on a continuous daily basis.

Key Concept

Call Money Market and Interbank Liquidity Management
Rate this question

Topics

Money Market: Institutions and Instruments

More questions from this topic