CALL MONEY

Summary

This video script explains the concept of call money, a short-term financial instrument used by banks to address liquidity issues. Call money allows banks to borrow or lend funds for a period of up to seven days. The script discusses the process, parties involved, and the benefits of call money, such as optimizing returns for banks and providing liquidity for institutions. However, it also highlights potential risks, such as accumulating debt. The video concludes with advice for bank managers on attracting and retaining clients for call money products, ensuring their successful management.

Takeaways

• 😀 Call money is a short-term loan provided by one bank to another to address liquidity issues, typically due within seven days.
• 😀 Call money loans usually have higher interest rates compared to other forms of loans.
• 😀 The loan agreement for call money must be repaid in a short period, typically no longer than seven days, and failure to do so turns the loan into a regular loan.
• 😀 Call money is intended to help banks address temporary liquidity shortages or surpluses in their daily operations.
• 😀 Two primary parties are involved in call money transactions: the lender bank (with surplus funds) and the borrowing bank (in need of funds).
• 😀 The main purpose of call money is to help banks meet their reserve requirements or short-term financial needs.
• 😀 Call money loans can be issued in both local currency (rupiah) and foreign currencies, facilitating interbank lending in money markets.
• 😀 The benefits of call money include helping businesses develop by providing short-term funding, although it must be repaid according to agreed terms.
• 😀 Call money loans allow businesses to invest in opportunities like real estate, gold, or other assets, which can provide financial growth.
• 😀 Risks associated with call money include the potential for banks to accumulate significant debt if they cannot repay the loan or maintain their investments.
• 😀 Bank managers need to actively engage in acquiring and maintaining clients by providing clear information and fostering good relationships to ensure trust and long-term partnerships.

Q & A

What is call money?

Call money is a short-term loan or credit facility provided by one bank to another to manage temporary liquidity shortages or excesses. It must be repaid within a maximum of seven days, and its interest rate is typically higher than other loans.

What are the key characteristics of call money?

Call money loans are short-term, typically with a maximum term of seven days. They are usually repaid on demand, and if not paid back by the due date, they become a regular loan. The interest rates are higher compared to other types of loans.

What are the conditions for providing a call money facility?

A call money facility is granted to banks facing liquidity shortages. The loan amount cannot exceed the clearing balance, and the loan must be repaid within seven days. If repayment is not made on time, the loan converts into a regular loan.

What is the purpose of call money?

Call money helps banks manage temporary liquidity issues, either by borrowing money to meet short-term obligations or by lending surplus funds to earn short-term interest.

Who are the two parties involved in call money transactions?

The two parties involved in call money transactions are the lending bank, which has surplus funds, and the borrowing bank, which needs the funds to address liquidity shortages.

What are the benefits of call money for businesses?

Call money provides businesses with access to short-term liquidity, allowing them to continue operations and develop their business. It also offers an opportunity to invest in various assets such as land, gold, and buildings.

What are the risks associated with call money?

The risks of call money include the possibility of accumulating debt if the borrowing bank cannot repay the loan on time. Additionally, banks or companies may need to sell assets, such as shares, to cover the loan, which could affect their financial position.

How can a manager encourage individuals to use call money products?

A manager can encourage individuals to use call money products by building personal relationships with potential clients, providing detailed information about the product, ensuring proper account management, and offering rewards to loyal clients.

What role does the bank play in managing call money?

The bank offering call money acts as both the lender and the intermediary, providing short-term loans to other banks or institutions that need liquidity. It manages client accounts and ensures that loans are repaid on time.

What happens if a call money loan is not repaid on time?

If a call money loan is not repaid by the due date, it is converted into a regular loan with different terms, potentially leading to higher interest rates and a more extended repayment period.