The Call & Notice Money Market Operations by RBI

The Call & Notice Money Market Operations by RBI

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The Reserve Bank of India (RBI) conducts operations in the call/notice money market to manage the liquidity in the financial system. The call/notice money market is a part of the money market where banks and financial institutions lend and borrow funds for a short period. The market is divided into two segments: call money market and notice money market. The call/notice money market RBI system helps to manage the liquidity in the financial system. When the RBI buys securities, it injects liquidity into the system, and when it sells securities, it absorbs liquidity. The RBI also conducts repurchase agreements (repos) in the call/notice money market. In a repo transaction, the RBI buys securities from banks with an agreement to sell them back at a future date.

The brokers play an important role in the notice money market by connecting lenders and borrowers. Notice Money Market brokers act as intermediaries between banks and financial institutions, matching their funding requirements. They facilitate transactions in the market by providing a platform for lenders and borrowers to come together. Brokers also provide information on the prevailing interest rates in the market, helping lenders and borrowers to negotiate better terms. They also help in the settlement of transactions by providing a mechanism for the transfer of funds and securities.

In the notice money market, lenders are required to maintain a minimum balance with the broker to participate in the market. This is known as the minimum margin requirement. The minimum margin requirement is usually a percentage of the total amount that the lender intends to lend. However, some brokers offer a zero balance facility in the notice money market. This means that lenders can participate in the market without maintaining a minimum balance. The Notice Money Market zero balance facility is beneficial for small lenders who do not have a large amount of funds to lend.

Thus, the call/notice money market operation is an important part of the money market where banks and financial institutions lend and borrow funds for a short period. The RBI conducts open market operations and repos in the market to manage the liquidity and brokers play an important role by connecting lenders and borrowers. They also provide information on the prevailing interest rates in the market while some brokers also offer a zero balance facility.