Which one of the following is false with respect to interest rate structure in the Indian money market?
1
A very tight liquidity position will increase the call rates while excess liquidity will give fairly low and stable rates.
2
If the liquidity crunch of the banks is passed on to the system, it may lead to high volatility in the call rates.
3
Call rates under normal liquidity conditions are the cap rate for the term money market.
4
In a volatile call market situation, lending will yield high return and by selling Inter-bank participation, the bank will have more money to play in the call market.