Interbank Call Money Market

• The RBI is likely to launch the pilot of central bank digital currency (CBDC) for transactions for interbank borrowing or call money market.

MONEY MARKET

• The money market basically refers to a section of the financial market where financial instruments with high liquidity and short-term maturities are traded.
• It includes buying and selling of securities of short-term maturities of one year or less, such as treasury bills and commercial papers.
• It is used by many participants, including companies, to raise funds.
• The money market is considered a safe place to invest due to the high liquidity of securities.

CALL MONEY

• Call money is also referred to as the money at call.
• It is a short-term loan that is due to be paid immediately in full as and when demanded by the lender.
• Unlike term loans, call money loan does not have a defined schedule of payment and maturity.
• Furthermore, the lender of the call money need not provide prior notice to the borrower about the repayment.

ABOUT THE INTERBANK CALL MONEY MARKET:

• It is a short-term money market which allows large financial institutions to borrow and lend money at interbank rates, the rate of interest that banks charge when they borrow funds from each other.
• The loans in the call money market are very short, usually lasting no longer than a week.
• These loans are often used to help banks meet reserve requirements.
• It is not exclusively used by banks. Interbank call money market customers can include other financial institutions, mutual funds, large corporations, and insurance companies.