What is overnight call money?

Overnight call money refers to short-term borrowing and lending of funds between financial institutions, typically for a duration of one day. It plays a crucial role in managing liquidity in the banking system, allowing banks to meet their immediate cash needs or invest excess reserves. The interest rate on overnight call money is known as the call rate, which can fluctuate based on market conditions and central bank policies. This mechanism helps stabilize the overall money supply and influences broader interest rates in the economy.