Call Money / Notice Money Market
Call Money, Notice Money and Term Money markets are sub-markets of the Indian Money Market. These refer to the markets for very short term funds.
- Call Money refers to the borrowing or lending of funds for 1 day.
- Notice Money refers to the borrowing and lending of funds for 2-14 days.
- Term money refers to borrowing and lending of funds for a period of more than 14 days.
Notice Money is also known as Short Notice Money.
Interest Rates in Call / Notice Money Markets
Interest rates in these markets are market determined i.e. by the demand and supply of short term funds. In India, 80% demand comes from the public sector banks and rest 20% comes from foreign and private sector banks. Then, around 80% of short term funds are supplied by Financial Institutions such as IDBI and Insurance giants such as LIC. Rest 20% of the short term funds come from the banks. Since banks work as both lenders and borrowers in these markets, they are also known as Inter-Bank market.
The short term fund market in India is located only in big commercial centres such as Mumbai, Delhi, Chennai and Kolkata. The intervention of RBI is prominent in the short term funds money market in India.
Call Money / Notice Money market is most liquid money market and is indicator of the day to day interest rates. If the call money rates fall, this means there is a rise in the liquidity and vice versa.
Over Night MIBOR
MIBOR refers to Mumbai Interbank Offer Rate. It is the average of the call money rates offered by a set of specific banks on a given day. MIBOR is calculated by the NSE after taking quotes from a specific set of Banks. MIBOR serves as a benchmark to which various entities in the market benchmark their short term interest rates.