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**Report on Reserve Bank of India Call, Notice and Term Money Markets Directions, 2021**
**1. Executive Summary:**
This report analyzes the Reserve Bank of India's (RBI) Master Direction Reserve Bank of India Call, Notice and Term Money Markets Directions, 2021. This is a new comprehensive direction governing participants and transactions in the Call, Notice, and Term Money Markets. It establishes eligibility criteria for participants, sets prudential limits for borrowing, outlines trading guidelines, and mandates reporting requirements. The direction aims to provide a consolidated and updated regulatory framework for these money markets. Key findings include the defined roles and responsibilities of market participants, the importance of adherence to FIMMDA guidelines, and the emphasis on transparency through reporting on the NDSCALL platform. The document has been updated twice since its original release, indicating a dynamic approach to regulation.
**2. Introduction:**
This report aims to provide a comprehensive overview of the Reserve Bank of India (RBI) Master Direction Reserve Bank of India Call, Notice and Term Money Markets Directions, 2021, based solely on the provided policy text. The report analyzes the policy's objectives, key provisions, affected stakeholders, and potential impacts, serving as an informative resource for industry participants.
**3. Policy Overview:**
* Core Objective(s): Based on the provided text, the core objectives of this Master Direction are:
* To provide a consolidated and updated set of directions for participants in the Call, Notice, and Term Money Markets.
* To regulate borrowing and lending activities in these markets by defining eligibility criteria and setting prudential limits.
* To promote transparency and efficiency in these markets through standardized market practices and reporting requirements.
**4. Background and Rationale:**
This is a *New Policy*, replacing earlier directions. The policy addresses the need for a comprehensive and updated regulatory framework for the Call, Notice, and Term Money Markets. The earlier directions are being superseded, suggesting a need to consolidate and refine existing regulations. The consultation process (public comments on a draft) indicates a desire to align the directions with the needs and feedback of market participants. The frequent updates shortly after initial publication show the RBI is actively adjusting based on initial performance and market feedback.
**5. Key Provisions / Changes:**
As a *New Policy*, the following are the main components and rules:
* **Eligibility:** Defines which entities can participate in the Call, Notice, and Term Money Markets, including Scheduled Commercial Banks, Payment Banks, Small Finance Banks, Regional Rural Banks, Cooperative Banks, and Primary Dealers.
* **Prudential Limits:** Sets prudential limits for outstanding borrowing transactions for different categories of participants, including Scheduled Commercial Banks, Small Finance Banks, Payment Banks, Regional Rural Banks, Cooperative Banks, and Primary Dealers. These limits are generally defined as a percentage of capital funds or net owned funds, subject to board-approved internal limits.
* **Trading Guidelines:** Specifies that interest rates are freely determined by participants, and transactions must be executed in Over-the-Counter (OTC) markets, including the NDSCALL platform or other authorized Electronic Trading Platforms (ETPs). Trading hours are set from 9:00 AM to 5:00 PM on each business day.
* **Market Practices:** Mandates adherence to standard market practices, methodologies, and documentation prescribed by FIMMDA in consultation with the RBI.
* **Cancellation and Termination:** Establishes guidelines for cancellation and termination of transactions, requiring reporting of such events.
* **Reporting Requirements:** Requires all Call, Notice, and Term Money transactions (other than those on NDS CALL) to be reported to the NDSCALL platform within 15 minutes of execution. Membership of the NDSCALL platform is mandatory for all eligible participants.
* **Information Disclosure:** Grants the RBI the authority to request information from market participants.
* **Data Dissemination:** Allows the RBI to publish anonymized data related to transactions in these markets.
* **Enforcement:** Outlines penalties for violating the directions, including disallowing entities from dealing in the money markets for a period not exceeding one month.
**6. Target Audience and Stakeholders:**
The primary target audience and stakeholders directly affected by this policy are:
* Scheduled Commercial Banks (excluding Local Area Banks)
* Payment Banks
* Small Finance Banks
* Regional Rural Banks
* State Cooperative Banks, District Central Cooperative Banks, and Urban Cooperative Banks
* Primary Dealers
* Fixed Income Money Market and Derivatives Association of India (FIMMDA)
* Clearcorp Dealing System Ltd. (or any other NDSCALL system operator)
**7. Implementation Aspects (Inferred):**
* **Responsible agency/bodies:** The Reserve Bank of India (RBI), specifically the Financial Markets Regulation Department (FMRD). Clearcorp Dealing System Ltd. (or any other NDSCALL system operator) is responsible for operating the NDSCALL platform. FIMMDA is responsible for prescribing market practices.
* **Timelines or procedures:**
* The Directions came into effect on April 5, 2021.
* All Call, Notice, or Term Money transactions (other than those executed on NDS CALL platform) must be reported to the NDSCALL platform within 15 minutes of execution.
* Eligible participants who were not members of the NDSCALL platform were required to obtain membership within six months from April 1, 2021.
**8. Expected Outcomes / Impact of Changes:**
The likely intended outcomes based on the policy's stated provisions in the text are:
* **Increased Transparency:** The mandatory reporting of transactions on the NDSCALL platform is expected to enhance transparency in the Call, Notice, and Term Money Markets.
* **Improved Regulatory Compliance:** By consolidating and updating the regulatory framework, the policy aims to ensure better compliance by market participants.
* **Greater Market Efficiency:** Standardized market practices and trading guidelines are expected to promote efficiency in these markets.
* **Enhanced Risk Management:** Prudential limits on borrowing transactions are intended to help participants manage risk effectively.
**9. Conclusion:**
The Reserve Bank of India's Master Direction Reserve Bank of India Call, Notice and Term Money Markets Directions, 2021, represents a comprehensive regulatory framework for the Call, Notice, and Term Money Markets. By defining eligibility criteria, setting prudential limits, outlining trading guidelines, and mandating reporting requirements, the direction aims to promote transparency, efficiency, and stability in these crucial segments of the financial market. The policy's significance lies in its consolidation of existing regulations, its alignment with market practices, and its focus on enhanced risk management. The updates shortly after its original publication demonstrate its dynamic and evolving nature.
Key Entities Referenced
RESERVE BANK OF INDIA: The central bank of India, the issuer of this document.
RBI20212278: Document identifier.
FMRD.DIRD.0114.01.001202122: Document identifier.
April 01, 2021: Initial issuance date of the document.
June 08, 2023: Date of update of the document.
June 25, 2021: Date of update of the document.
Master Direction Reserve Bank of India Call, Notice and Term Money Markets Directions, 2021: The title of the directive being issued.
Paragraph 6 of the Statement on Developmental and Regulatory Policies, Reserve Bank of India: Reference to a statement issued by the Reserve Bank of India.
second Bimonthly Monetary Policy Statement for 201920 dated June 06, 2019: Reference to a monetary policy statement.
December 04, 2020: Date of release of draft directions for public comment.
Dimple Bhandia: Chief General Manager at Reserve Bank of India.
Financial Markets Regulation Department: Department within the Reserve Bank of India responsible for financial markets regulation.
Central Office Building, 9th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai 400001. India: Address of the Financial Markets Regulation Department.
Notification No.FMRD.DIRD.0214.01.001202122 dated April 01, 2021: Notification number and date of the Master Direction.
Reserve Bank of India Act, 1934: The act that confers powers to the Reserve Bank of India.
section 45W: Section of the Reserve Bank of India Act, 1934 conferring powers.
section 45U: Section of the Reserve Bank of India Act, 1934 conferring powers.
Section I of the FMRD Master Direction No. 2201617 dated July 07, 2016: Previous direction being superseded.
Direction No. FMRD.DIRD.0914.01.001201819 dated October 29, 2018: Previous direction being superseded.
Direction No. FMRD.DIRD.0114.01.001202021 dated December 04, 2020: Previous direction being superseded.
April 05, 2021: Effective date of the Directions.
Payment Bank: A type of bank as defined in clause c of section 5 of the Banking Regulation Act, 1949.
Small Finance Bank: A type of bank as defined in clause c of section 5 of the Banking Regulation Act, 1949.
section 5 of the Banking Regulation Act, 1949: Section of the Banking Regulation Act, 1949 that defines the term Bank
regional rural bank: A type of bank.
State Bank of India: A major public sector bank in India.
section 56: Section of the Banking Regulation Act, 1949 relevant to cooperative banks.
Call Money: Definition: borrowing or lending in unsecured funds on overnight basis.
Electronic Trading Platform Reserve Bank Directions, 2018 dated October 05, 2018: Reference document defining Electronic Trading Platform.
Section 2 f of the Securities Contract Regulation Act, 1956: Section of the Securities Contract Regulation Act, 1956
Negotiated Dealing SystemCALL or NDSCALL: The electronic trading platform for execution and reporting of transactions in Call, Notice and Term Money Markets.
section 45IA of the Reserve Bank of India Act, 1934: Section of the Reserve Bank of India Act, 1934 that defines the term Net Owned Fund.
Notice Money: Definition: borrowing or lending in unsecured funds for tenors up to and inclusive of 14 days excluding overnight borrowing or lending.
OvertheCounter markets or OTC markets: Definition: markets where transactions are undertaken in any manner other than on exchanges and shall include those executed on electronic trading platforms.
section 22 of the Banking Regulation Act, 1949: Section of the Banking Regulation Act, 1949 related to bank licensing.
Reserve Bank Guidelines for Licensing of Payments Banks dated November 27, 2014: Guidelines for licensing Payment Banks.
Primary Dealer: Definition: a NonBanking Financial Company that holds a letter of authorisation issued by the Reserve Bank to act as a Primary Dealer.
"Guidelines for Primary Dealer in Government Securities Market" dated March 29, 1995: Guidelines for Primary Dealers.
Reserve Bank Guidelines for Licensing of Small Finance Banks dated November 27, 2014: Guidelines for licensing Small Finance Banks.
Term Money: Definition: borrowing or lending in unsecured funds for periods exceeding 14 days and up to one year.
Scheduled Commercial Banks: Eligible participants in the Call, Notice and Term Money Markets.
Local Area Banks: Excluded from the definition of Scheduled Commercial Banks.
Regional Rural Banks: Eligible participants in the Call, Notice and Term Money Markets.
State Cooperative Banks, District Central Cooperative Banks and Urban Co operative Banks: Eligible participants in the Call, Notice and Term Money Markets, collectively referred to as Cooperative Banks.
Department of Regulation of the Reserve Bank: Department responsible for the regulatory framework of the exposure norms
FMRD.DIRD.0214.01.001202324 dated June 08, 2023: Circular amending the prudential limits for Scheduled Commercial Banks.
FMRD.DIRD. 0614.01.001202122 dated June 25, 2021: Circular amending Term Money rules.
Clearcorp Dealing System Ltd.: NDSCALL system operator.
Financial Markets Regulation Department FMRD of the Reserve Bank: The department within the Reserve Bank to be advised of internal limits.
Fixed Income Money Market and Derivatives Association of India FIMMDA: Organization prescribing market practices and documentation.
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2021-22/78
FMRD.DIRD.01/14.01.001/2021-22 April 01, 2021
(Updated as on June 08, 2023)
(Updated as on June 25, 2021)
To,
All Eligible Market Participants
Madam/Sir,
Master Direction - Reserve Bank of India (Call, Notice and Term Money
Markets) Directions, 2021
Please refer to Paragraph 6 of the Statement on Developmental and Regulatory
Policies, Reserve Bank of India, issued as part of the second Bi-monthly Monetary
Policy Statement for 2019-20 dated June 06, 2019 regarding Comprehensive Review
of Money Market Directions.
2. The draft Directions were released for public comments on December 04, 2020.
Based on the feedback received from the market participants, the Reserve Bank of
India (Call, Notice and Term Money Markets) Directions, 2021 were reviewed and
have since been finalised. The Directions are enclosed herewith.
Yours faithfully,
(Dimple Bhandia)
Chief General Manager
�वत्तीय बाज़ार �व�नयमन �वभाग,क�द्र�य कायार्लय भवन, नौवीं मंिजल, शह�द भगत �सहं माग,र् फोटर्, मुंबई–400001.भारत
फोन: (91-22) 2260 1000,फैक्स: (91-22) 22702290 ई-मेल: cgmfmrd@rbi.org.in
Financial Markets Regulation Department, Central Office Building, 9th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001. India
Tel: (91-22) 2260 1000, Fax: (91-22) 22702290 e-mail- cgmfmrd@rbi.org.in
�हन्द� आसान है, इसका प्रयोग बढ़ाइएFINANCIAL MARKETS REGULATION DEPARTMENT
Notification No.FMRD.DIRD.02/14.01.001/2021-22 dated April 01, 2021
Master Direction- Reserve Bank of India (Call, Notice and Term Money Markets)
Directions, 2021
In exercise of the powers conferred under section 45W of the Reserve Bank of India
Act, 1934 (hereinafter called the Act) read with section 45U of the Act and of all the
powers enabling it in this behalf and in supersession of Section I of the FMRD Master
Direction No. 2/2016-17 dated July 07, 2016, Direction No.
FMRD.DIRD.09/14.01.001/2018-19 dated October 29, 2018 and Direction No.
FMRD.DIRD.01/14.01.001/2020-21 dated December 04, 2020, the Reserve Bank of
India (hereinafter called the Reserve Bank), hereby issues the following Directions to
all persons and agencies eligible to deal in Call, Notice and Term Money Markets.
1. Short title and commencement
(a) These Directions shall be called the Master Direction- Reserve Bank of India
(Call, Notice and Term Money Markets) Directions, 2021.
(b) These Directions shall come into force with effect from April 05, 2021.
2. Definitions
(a) For the purpose of these Directions, unless the context otherwise requires:
(i) “Bank” means a banking company (including a Payment Bank and a
Small Finance Bank) as defined in clause (c) of section 5 of the Banking
Regulation Act, 1949 or a “regional rural bank”, a “corresponding new
bank” or “State Bank of India” as defined in clauses (ja), (da) and (nc),
of section 5 respectively thereof, or a “cooperative bank” as defined in
clause (cci) of section 5 read with section 56 of the said Act;
(ii) “Call Money” means borrowing or lending in unsecured funds on
overnight basis;
(iii) “Capital Funds” shall have the meaning assigned in the applicable
capital regulations issued by the Department of Regulation of theReserve Bank as amended from time to time and shall be calculated
as per the latest audited balance sheet;
(iv) “Electronic Trading Platform” or “ETP” shall have the meaning
assigned in paragraph 2 (1) (iii) of the Electronic Trading Platform
(Reserve Bank) Directions, 2018 dated October 05, 2018, as modified
from time to time;
(v) “Exchange” shall mean ‘recognised stock exchange’ and shall have
the same meaning as assigned to in Section 2 (f) of the Securities
Contract Regulation Act, 1956.
(vi) “Fortnight” shall have the meaning assigned to it under section 42 of
the Reserve Bank of India Act, 1934;
(vii) “Negotiated Dealing System-CALL” or “NDS-CALL” is the
electronic trading platform for execution and reporting of transactions
in Call, Notice and Term Money Markets;
(viii) “Net Owned Fund” shall have the meaning assigned to it under the
Explanation to section 45-IA of the Reserve Bank of India Act, 1934;
(ix) “Notice Money” means borrowing or lending in unsecured funds for
tenors up to and inclusive of 14 days excluding overnight borrowing or
lending;
(x) “Over-the-Counter markets” or “OTC markets” refers to markets
where transactions are undertaken in any manner other than on
exchanges and shall include those executed on electronic trading
platforms;
(xi) “Payment Bank” means a bank licensed under section 22 of the
Banking Regulation Act, 1949 and governed by the terms of the “Reserve
Bank Guidelines for Licensing of Payments Banks” dated November 27,
2014, as amended from time to time;
(xii) “Primary Dealer” means a Non-Banking Financial Company that holds
a letter of authorisation issued by the Reserve Bank to act as a Primary
Dealer, in terms of the "Guidelines for Primary Dealer in Government
Securities Market" dated March 29, 1995, as amended from time to time;(xiii) “Small Finance Bank” means a bank licensed under section 22 of the
Banking Regulation Act, 1949 and governed by the terms of the “Reserve
Bank Guidelines for Licensing of Small Finance Banks” dated November
27, 2014, as amended from time to time;
(xiv) “Term Money” means borrowing or lending in unsecured funds for
periods exceeding 14 days and up to one year.
(b) Words and expressions used but not defined in these Directions shall have the
meaning assigned to them in the Reserve Bank of India Act, 1934.
3. Participants
The following entities shall be eligible to participate in the Call, Notice and Term
Money Markets, both as borrowers and lenders:
(a) Scheduled Commercial Banks (excluding Local Area Banks);
(b) Payment Banks;
(c) Small Finance Banks;
(d) Regional Rural Banks;
(e) State Co-operative Banks, District Central Co-operative Banks and Urban Co-
operative Banks (hereinafter Co-operative Banks); and
(f) Primary Dealers.
4. Prudential limits
(a) Prudential limits in respect of outstanding lending transactions in the Call,
Notice and Term Money Markets shall be decided by the participants with the
approval of their Board within the regulatory framework of the exposure norms
prescribed by the Department of Regulation of the Reserve Bank for the eligible
participant concerned.
(b) Prudential limits for outstanding borrowing transactions in the Call, Notice and
Term Money Markets are set out in Table 1.Table 1: Prudential limits for outstanding borrowing transactions in Call,
Notice and Term Money Markets
Sr. No. Participant Category Prudential Limit
1 Scheduled Commercial Call, Notice and Term Money: Internal board
Banks1 approved limits within the prudential limits for inter-
bank liabilities prescribed by Department of
Regulation.
2 Small Finance Banks Call and Notice Money:
(i) 100% of capital funds, on a daily average basis
in a reporting fortnight, and
(ii) 125% of capital funds on any given day.
Term Money:
(i) Internal board approved limit within the
prudential limits for inter-bank liabilities.
3 Payment Banks, an d Call, Notice and Term Money:
Regional Rural Banks (i) 100% of capital funds, on a daily average
basis in a reporting fortnight, and
(ii) 125% of capital funds on any given day.
4 Co-operative Banks Call, Notice and Term Money:
(i) 2.0% of aggregate deposits as at the end of
the previous financial year.
5 Primary Dealers Call and Notice Money:
(i) 225% of Net Owned Fund (NOF) as at the
end of the previous financial year on a daily
average basis in a reporting fortnight.
Term Money2:
(i) 225% of Net Owned Fund (NOF) as at the
end of previous financial year.
1 Inserted vide Circular FMRD.DIRD.02/14.01.001/2023-24 dated June 08, 2023. Prior to the
amendment, the prudential limits for Scheduled Commercial Banks (including Small Finance Banks) for
Call and Notice Money were (i) 100% of capital funds, on a daily average basis in a reporting fortnight,
and (ii) 125% of capital funds on any given day.
2 Inserted vide Circular FMRD.DIRD. 06/14.01.001/2021-22 dated June 25, 2021.(c) Eligible participants may, with the approval of their respective Board of Directors
(or equivalent bodies), fix separate internal limits within the prudential limits for
borrowing and lending in the Call, Notice and Term Money Markets. The internal
limits so arrived at by the eligible participants shall be conveyed to the Clearcorp
Dealing System Ltd., or any other NDS-CALL system operator authorised by the
Reserve Bank for setting of limits in the NDS-CALL platform, under advice to the
Financial Markets Regulation Department (FMRD) of the Reserve Bank through
e-mail.
5. General guidelines
(a) Interest rates: Eligible participants are free to decide on interest rates in the Call,
Notice and Term Money Markets.
(b) Trading venues: Call, Notice and Term Money transactions shall be executed
in Over-the-Counter markets, including on the NDS-CALL platform or any other
Electronic Trading Platform authorised for the purpose by the Reserve Bank.
(c) Market timings: The market timings for Call, Notice and Term Money
transactions shall be from 9:00 AM to 5:00 PM on each business day or as
specified by the Reserve Bank from time to time.
(d) Market practices and documentation: Eligible participants shall follow the
standard market practices, methodologies and documentation prescribed by
Fixed Income Money Market and Derivatives Association of India (FIMMDA), in
consultation with the Reserve Bank, from time to time.
6. Cancellation and termination
(a) A Call, Notice or Term Money transaction shall, normally, not be cancelled.
(b) A Notice or Term Money transaction can be terminated before maturity at a
mutually agreed price.
(c) Any cancellation or termination of a Call, Notice or Term Money transaction
shall be reported as set out in paragraph 7 of these Directions.
7. Reporting requirements(a) All Call, Notice or Term Money transactions, other than those executed on NDS-
CALL platform, shall be reported to the NDS-CALL platform within 15 minutes
of execution (the time when interest rate is agreed), by both counterparties to
the transaction or by the Electronic Trading Platform concerned, as the case
may be. For this purpose, all eligible participants in the Call, Notice and Term
Money Markets shall obtain membership of NDS-CALL platform. Eligible
participants who are not members of NDS-CALL platform shall obtain such
membership within a period of six months from the date of these Directions.
(b) A Call, Notice or Term Money transaction executed on the NDS-CALL platform
need not be reported separately.
(c) Any cancellation or termination of a Call, Notice and Term Money transaction
shall be reported on the NDS-CALL platform within 15 minutes of cancellation
by each counterparty to the transaction or by the Electronic Trading Platform
concerned, as the case may be.
(d) Any misreporting or multiple reporting of the same OTC markets deal by a
counterparty shall be immediately brought to the notice of the Clearcorp Dealing
System Ltd., or any other NDS-CALL system operator authorised by the
Reserve Bank and also to the Financial Markets Regulation Department,
Reserve Bank of India, Central Office, Fort, Mumbai, through email.
8. Obligation to provide information sought by the Reserve Bank: The Reserve
Bank may call for any information or statement or seek any clarification, which in the
opinion of the Reserve Bank is relevant, from persons or agencies dealing in the Call,
Notice and Term Money Markets, including eligible participants, and such persons,
agencies and participants shall furnish such information, statement or clarification.
9. Dissemination of data: The Reserve Bank or any other person authorised by the
Reserve Bank, may publish any anonymised data related to transactions in Call,
Notice and Term Money Markets.
10. Violation of Directions: In the event of any person or agency violating any
provision of these Directions or the provisions of any other applicable law, the Reserve
Bank may, in addition to taking any penal or regulatory action in accordance with
law, disallow that person or agency from dealing in the Call, Notice and Term MoneyMarkets for a period not exceeding one month at a time, after providing reasonable
opportunity to the person or agency to defend its actions, and such action may be
made public by the Reserve Bank.
11. These Directions shall apply to Call, Notice and Term Money transactions entered
into from the date these Directions come into force. Provisions of Section I of the
FMRD Master Direction No. 2/2016-17 dated July 07, 2016; Direction No.
FMRD.DIRD.09/14.01.001/2018-19 dated October 29, 2018 and Direction No.
FMRD.DIRD.01/14.01.001/2020-21 dated December 04, 2020, shall continue to be
applicable to transactions undertaken in accordance with the said Directions till the
expiry of those contracts.