Banking · Money Market Instruments
In the Indian money market, the categorization of transactions into Call, Notice, and Term money depends on the duration of the loan. If a scheduled commercial bank borrows funds from another financial institution on a Friday and the repayment is scheduled for the following Monday (assuming there are no intervening public holidays), how is this transaction classified and what is the relationship with the Standing Deposit Facility (SDF)?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It is classified as Notice Money because the period from Friday to Monday is counted as 3 days, and the Standing Deposit Facility (SDF) rate acts as the floor for the interest rate corridor.✓
- 2It is classified as Term Money because any borrowing that spans over a weekend is automatically treated as a long-term liability.
- 3It is classified as Call Money because the borrowing is effectively for a single working day, and the rate is managed by the SDF.
- 4It is classified as Notice Money because the duration exceeds 24 hours, and the rate is determined exclusively by the Repo Rate.
Correct answer
It is classified as Notice Money because the period from Friday to Monday is counted as 3 days, and the Standing Deposit Facility (SDF) rate acts as the floor for the interest rate corridor.
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