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Informist, Wednesday, Apr. 8, 2026

 

--RBI Malhotra: To allow some more non-bk entities in term money mkt 

--RBI Malhotra: To enhance standalone PD borrowing limits in term money mkt 

 

MUMBAI – To improve monetary policy transmission between the overnight borrowing market and longer-term interest rates, the Reserve Bank of India plans to permit All India Financial Institutions and non-banking financial companies, including housing finance companies, to participate in the term money market, according to the central bank's statement on developmental and regulatory policies released Wednesday. The central bank also plans to increase borrowing limits for standalone primary dealerships in this market, it said. The revised directions will be issued separately.

 

Currently, only banks and standalone primary dealerships can participate in the term money market, subject to certain limits. The new measures aim to improve depth of participation and liquidity in this market, the statement said. As per the central bank's 2021 master direction on call, notice and term money markets--which was last revised in June 2023--term money refers to unsecured borrowing or lending of funds for tenures exceeding 14 days and up to one year. As per the same directions, the prudential limit for outstanding borrowing transactions in the term money market for a standalone primary dealership is 225% of its net owned fund as at the end of the previous financial year. 

 

Primary dealerships are active borrowers in the uncollateralised term money segment, and often do not find enough lenders, a concern that has been passed on to the central bank, dealers have said. Banks avoid unsecured lending for long periods, especially for tenures that cross a financial quarter-end due to risk management and compliance, traders at standalone primary dealerships have said.  End

 

Reported by Cassandra Carvalho

Edited by Avishek Dutta

 

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