The Reserve Bank of India on June 25 released draft Master Directions for the call, notice and term money markets that would expand participation in the term money segment and revise prudential limits.
Under the draft, All India Financial Institutions, including Exim Bank, NABARD, NHB, SIDBI and NaBFID, and housing finance companies, excluding base layer NBFCs, would be eligible to participate in the term money market as both borrowers and lenders. Housing finance companies would be allowed to borrow term money up to 200% of net owned funds as at the end of the previous financial year, while borrowing limits for AIFIs would be set through internal board-approved limits within ceilings prescribed by RBI’s Department of Regulation.
For outstanding lending transactions in the call, notice and term money markets, participants would determine prudential limits through a board-approved process, subject to applicable RBI exposure norms for regulated entities. RBI also proposed raising the borrowing cap for standalone primary dealers for term money borrowings of two to 14 days and for inter-corporate deposits to 400% of net owned funds from 225%.
The central bank said an active term money market provides an additional funding avenue and supports transmission across interest rate tenures. RBI has invited comments on the draft directions until July 17 and separately issued a draft direction consolidating rules for secondary market transactions in government securities.