What is the meaning of Call Money Rate?

Call Money Rate stands for the interest rate on short-term loans which are given by banks to brokers for funding of margin accounts. These do not have any repayment schedule and has to be repaid on demand. Although trading on margins is risky as it is done with borrowed money but then there is obvious advantage of magnification of investment gains. However, the losses are also magnified accordingly.

Usually, the duration of the loan is 1 day. These loans are given to bridge the asset-liability mismatch and also compliance with statutory CRR and SLR requirements in addition to unforeseen fund requirements. Call money rate is also affected by demand and supply of liquidity.

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