Executive Summary:
The Reserve Bank of India (RBI) issued Master Directions for Call, Notice and Term Money Markets, effective April 5, 2021. These directions consolidate and supersede previous regulations, providing guidelines for participants in these markets. All eligible participants must obtain membership of NDSCALL platform within six months from April 1, 2021. The directions outline eligibility, prudential limits, trading guidelines, reporting requirements, and potential penalties for violations.
Key Points / Main Content:
Eligibility and Participation:
* Eligible participants include Scheduled Commercial Banks (excluding Local Area Banks), Payment Banks, Small Finance Banks, Regional Rural Banks, Cooperative Banks, and Primary Dealers.
* Participants can act as both borrowers and lenders.
Prudential Limits:
* Participants' Boards must approve prudential limits for outstanding lending transactions, adhering to regulatory exposure norms.
* Specific prudential limits for outstanding borrowing transactions are defined for each participant category, such as Scheduled Commercial Banks, Small Finance Banks, Payment Banks, Regional Rural Banks, Cooperative Banks, and Primary Dealers.
* Eligible participants may fix separate internal limits for borrowing and lending with Board approval, to be communicated to Clearcorp Dealing System Ltd.
Trading Guidelines:
* Interest rates are freely determined by participants.
* Transactions must occur in Over-the-Counter (OTC) markets, including the NDSCALL platform or other RBI-authorized Electronic Trading Platforms (ETPs).
* Market timings are from 9:00 AM to 5:00 PM on business days or as specified by RBI.
* Participants must adhere to standard market practices and documentation prescribed by FIMMDA.
Transaction Handling:
* Cancellation of transactions is generally discouraged.
* Termination of Notice or Term Money transactions before maturity is allowed at a mutually agreed price.
* All cancellations or terminations must be reported as per the directions.
Reporting Requirements:
* Transactions not executed on the NDSCALL platform must be reported to the NDSCALL platform within 15 minutes of execution.
* Membership of NDSCALL platform is mandatory for all eligible participants in the Call, Notice and Term Money Markets.
* Cancellations or terminations must be reported on the NDSCALL platform within 15 minutes.
* Misreporting or multiple reporting of OTC deals must be immediately reported to Clearcorp Dealing System Ltd. and the RBI.
General Obligations:
* Participants must provide information requested by the RBI.
* The RBI may disseminate anonymized transaction data.
* Violation of directions may result in penalties, including being disallowed from dealing in the markets for up to one month.
Supersession and Applicability:
* These directions supersede 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.0114.01.001/2020-21 dated December 04, 2020.
* These directions apply to transactions entered into from April 5, 2021.
Impact Analysis:
Scheduled Commercial Banks (excluding Local Area Banks), Payment Banks, Small Finance Banks, Regional Rural Banks, Cooperative Banks, and Primary Dealers:
* Impact: These entities are directly governed by the new directions, affecting their participation in the Call, Notice, and Term Money Markets. They must adhere to the eligibility criteria, prudential limits, trading guidelines, and reporting requirements.
* Action Required: Review and update internal policies and procedures to comply with the new directions, obtain membership of NDSCALL platform (if not already a member), establish board-approved prudential limits, and ensure accurate and timely reporting of transactions.
Reserve Bank of India:
* Impact: The RBI is responsible for overseeing and enforcing the new directions. It will monitor market activity, collect data, and take action against non-compliant entities.
* Action Required: Monitor compliance with the new directions, disseminate anonymized transaction data, and take appropriate action against any violations.
Fixed Income Money Market and Derivatives Association of India (FIMMDA):
* Impact: FIMMDA is responsible for prescribing standard market practices, methodologies, and documentation for the Call, Notice, and Term Money Markets, in consultation with the Reserve Bank.
* Action Required: Review and update existing market practices, methodologies, and documentation to align with the new directions.
Clearcorp Dealing System Ltd./ NDSCALL System Operator:
* Impact: Responsible for operating the NDSCALL platform and ensuring accurate reporting of transactions.
* Action Required: Facilitate membership for eligible participants, ensure the platform supports the new reporting requirements, and monitor transactions for compliance.
Key Entities Referenced
Reserve Bank of India: The central bank of India, which issued the Master Direction regarding Call, Notice and Term Money Markets.
Master Direction Reserve Bank of India Call, Notice and Term Money Markets Directions, 2021: The primary policy document being analyzed, which provides guidelines and regulations for Call, Notice, and Term Money Markets.
Reserve Bank of India Act, 1934: The Act of the Indian Parliament that established the Reserve Bank of India and provides it with its powers.
Financial Markets Regulation Department: The department within the Reserve Bank of India responsible for regulating financial markets.
Mumbai, Maharashtra: The city in India where the Central Office of the Financial Markets Regulation Department of the Reserve Bank of India is located.
Banking Regulation Act, 1949: An act to consolidate and amend the law relating to banking companies.
Fixed Income Money Market and Derivatives Association of India: An association that prescribes standard market practices, methodologies, and documentation for eligible participants in consultation with the Reserve Bank.
Negotiated Dealing System-CALL: The electronic trading platform for execution and reporting of transactions in Call, Notice and Term Money Markets
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.