Reserve Bank of India (RBI) has reviewed the borrowing limits in Call and Notice Money Markets for Scheduled Commercial Banks. This move allows banks to set their own limits for borrowing in these markets, excluding small finance banks and payment banks.
The revised policy gives more flexibility to Scheduled Commercial Banks in managing their borrowing requirements in Call and Notice Money Markets. Previously, banks had to adhere to specific limits set by the RBI. However, with the new directive, banks can determine their own borrowing limits within the prudential limits for inter-bank liabilities prescribed by the Department of Regulation.
This change offers several advantages to banks. Firstly, it allows banks to align their borrowing limits with their individual liquidity needs, taking into account their financial stability and risk appetite. Banks can now optimize their borrowing strategies based on market conditions and their own funding requirements.
Secondly, the revised policy promotes greater autonomy for banks in managing their short-term funding. It recognizes that banks have different liquidity profiles and risk management capabilities, and therefore, they are better positioned to assess their own borrowing limits.
Furthermore, this move is expected to enhance the efficiency of Call and Notice Money Markets by facilitating a more competitive environment. Banks can compete more effectively for funds in these markets, which can lead to better pricing and improved liquidity.
The Reserve Bank of India’s decision to allow Scheduled Commercial Banks to set their own borrowing limits in Call and Notice Money Markets is a significant development in the banking sector. The revised policy provides banks with greater flexibility, autonomy, and the opportunity to optimize their short-term funding strategies. This move is expected to enhance market efficiency and competitiveness.
RESERVE BANK OF INDIA
RBI/2022-23/38
FMRD.DIRD.02/14.01.001/2023-24 Dated: June 08, 2023
To
All Eligible Market Participants
Madam / Sir
Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021-Review
Please refer to Paragraph 1 of the Statement on Developmental and Regulatory Policies, announced as a part of the Bi-monthly Monetary Policy Statement for 2023-24 dated June 08, 2023, regarding Borrowing in Call and Notice Money Markets by Scheduled Commercial Banks. Attention is also invited to the Master Direction – Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021 dated April 01, 2021, as amended from time to time (hereinafter referred as ‘Master Direction’).
2. On a review, it has been decided that henceforth, Scheduled Commercial Banks (excluding small finance banks and payment banks) may set their own limits for borrowing in Call and Notice Money Markets. As in the case of Term Money Market borrowing, Scheduled Commercial Banks shall put in place internal board approved limits for borrowing through Call and Notice Money Markets within the prudential limits for inter-bank liabilities prescribed by Department of Regulation.
3. The instruction shall be applicable with immediate effect. The Master Direction has been accordingly updated.
Yours faithfully,
(Dimple Bhandia)
Chief General Manager
