Explain call money as money market instrument.

Explain call money as money market instrument. 

Ans. Call money in India is an overnight inter-bank funds market in India. It fulfils the need of banks to satisfy their depositors. 

It provides overnight funds or deposits. Only banks, primary dealers and restricted financial institutions participate in this market. Call money is demanded for deficits of banks and primary dealers and supplied by temporary surpluses. Call money has been totally deregulated by RBI but only for banks and primary dealers. It is clean lending in the form of deposits. Interest rates have been deregulated and are determined by market forces. It has wide fluctuations even during the day. RBI intervenes through LAF and Open Market Operations in case of high value transactions. Brokers are not allowed.