Notice Money & Term Money Markets

Introduction

While "Call Money" is for 1 day, sometimes banks need funds for slightly longer periods.

1. Classification by Time Period

A. Call Money

• Duration: 1 Day (Overnight).

B. Notice Money

• Duration: 2 Days to 14 Days.
• Why 'Notice'?: Because the lender has to give a notice to call back the money? Not exactly. It's just the terminology for this duration bucket.

C. Term Money

• Duration: 15 Days to 1 Year.
• Usage: Inter-bank term deposits. Not very active in India compared to Call/Notice.

2. Characteristics

• Unsecured: These loans are typically unsecured (no collateral). Banks trust each other.
• Participants: Same as Call Money (Banks & PDs).
• Rates: Usually slightly higher than Call Rate due to the longer duration risk.

Summary

• 1 Day: Call Money.
• 2 - 14 Days: Notice Money.
• 15 Days - 1 Year: Term Money.

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