Call money is minimum short-term

finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of f ...

repayable on demand, with a maturity period of one to fourteen days or overnight to a fortnight. It is used for inter-bank transactions. The money that is lent for one day in this market is known as "call money" and, if it exceeds one day, is referred to as "notice money." Commercial banks have to maintain a minimum cash balance known as the cash reserve ratio. Call money is a method by which banks lend to each other to be able to maintain the

cash reserve ratio In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-i ...

. The interest rate paid on call money is known as the call rate. It is a highly volatile rate that varies from day to day and sometimes even from hour to hour. There is an inverse relationship between call rates and other short-term money market instruments such as certificates of deposit and commercial paper. A rise in call money rates makes other sources of finance, such as commercial paper and certificates of deposit, cheaper in comparison for banks to raise funds from these sources. In the international market, the term usually refers to the short term financing by banking institutions to brokers for maintaining the margin account. It is different from the term "loan" as the schedule for the payment of

interest In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distin ...

and principal is not fixed. Since, the loan can be called at any time, it is riskier than other forms of loans. It helps in meeting liquidity needs at short notice. ref>https://investinganswers.com/dictionary/c/call-money Call money is a very short-term bank loan

References

Loans {{Business-term-stub