Banking · Money Market Regulations
Which of the following statements accurately describes the prudential limits governing borrowing and lending operations in the Indian Call Money Market by Scheduled Commercial Banks (SCBs) and Primary Dealers (PDs)?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Scheduled Commercial Banks are allowed to borrow a maximum of 100 percent of their capital funds on an average basis in a reporting fortnight, while Primary Dealers can borrow up to 225 percent of their net owned funds.✓
- 2Scheduled Commercial Banks have a borrowing limit of 125 percent of their capital funds on any given day, while their lending is capped at 50 percent of their capital funds on an average basis.
- 3Primary Dealers are permitted to lend up to 25 percent of their net owned funds in the call money market to maintain liquidity, while their borrowing is restricted to 200 percent of their net owned funds on an average basis.
- 4Non-banking financial companies are the primary lenders in the call money market providing over 80 percent of the daily liquidity to Scheduled Commercial Banks to ensure the call rate stays near the Repo rate.
Correct answer
Scheduled Commercial Banks are allowed to borrow a maximum of 100 percent of their capital funds on an average basis in a reporting fortnight, while Primary Dealers can borrow up to 225 percent of their net owned funds.
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