CA Foundation · Business Economics · Money Market
Which of the following statements about the call money market is correct?
The call money market handles very short-term interbank borrowing and lending, from overnight up to 14 days. Banks use it to manage daily liquidity and reserve requirements. It is not a market for multi-year loans or for equity shares.
- AIt deals in very short-term borrowing and lending of funds, ranging from overnight up to 14 daysCorrect
- BIt deals in loans of one to five years among banks
- CIt is a market where only the RBI can lend
- DIt trades in equity shares of banks
Explanation
The call or notice money market is used mainly by banks to meet day-to-day liquidity and reserve needs. Overnight money is called call money, and notice money covers periods of 2 to 14 days. It is not a long-term market and is not restricted to the RBI.
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