Master Circular on Call/Notice Money Market Operations - RBI - Reserve Bank of India
130779640
Published on
July 01, 2005
Master Circular on Call/Notice Money Market Operations
RBI/2005-06/14 Ref. MPD. No.269/07.01.279/2005-06 July 1, 2005 The Chairmen/Chief Executives of Dear Sirs, Master Circular on Call/Notice Money Market Operations As you are aware, the Reserve Bank of India has, from time to time, issued a number of guidelines/instructions/directives to banks in regard to matters relating to call/notice money market. To enable eligible institutions to have current instructions at one place, a Master Circular incorporating all the existing guidelines/instructions/directives on the subject has been prepared. It may be noted that this Master Circular consolidates and updates all the instructions/guidelines contained in the circulars issued upto June 30, 2005, in so far as they relate to operations of eligible institutions in the call/notice money markets. This Master Circular has been placed on the RBI website at /en/web/rbi/notifications/master-circulars. Yours faithfully
(Deepak Mohanty)
Master Circular Call/Notice Money
Market Operations
Master Circular on Call/Notice Money Market Operations 1. Introduction 1.1 The money market is a market for short-term financial assets that are close substitutes of money. The most important feature of a money market instrument is that it is liquid and can be turned over quickly at low cost and provides an avenue for equilibrating the short-term surplus funds of lenders and the requirements of borrowers. The call/notice money market forms an important segment of the Indian money market. Under call money market, funds are transacted on overnight basis and under notice money market, funds are transacted for the period between 2 days and 14 days. 2. Participants 2.1 Participants in call/notice money market currently include banks, Primary Dealers (PDs), development finance institutions, select insurance companies and select mutual funds (Annex I). Of these, banks and PDs can operate both as borrowers and lenders in the market. Non-bank institutions, which have been given specific permission to operate in call/notice money market can, however, operate as lenders only (Table 1). Table 1: Eligibility for Transactions in Call/Notice Money Market
3.1 The Narasimham Committee (1998) recommended that call/notice money market in India should be made purely an inter-bank market. Accordingly, RBI initiated the process of phasing out of non-bank institutions (i.e., all-India Financial Institutions, select Insurance companies and Mutual Funds) from call/notice money market in a gradual manner since May 5, 2001. Further, in order to preserve integrity of the financial market as also to achieve balanced development of various segments of money market, RBI has put in place prudential limits in respect of both borrowing and lending in call/notice money market for banks and PDs since October 5, 2002. 3.2 The present status of prudential limits as applicable to various classes of institutions are given in Table 2. Table 2: Prudential Limit for Transactions in Call/Notice Money Market
3.3 No new non-bank institutions are permitted to operate (i.e., lend) in the call/notice money market with effect from May 5, 2001. 4.1 Eligible participants are free to decide on interest rates in call/notice money market.
5.1 It is mandatory for all Negotiated Dealing System (NDS) members to report all their call/notice money market deals on NDS. Deals should be reported within 15 minutes on NDS, irrespective of the size of the deal or whether the counterparty is a member of the NDS or not. In case, there is repeated non-reporting of deals by an NDS member, it will be considered whether non-reported deals by that member should be treated as invalid with effect from a future date. 5.2 With the stabilisation of reporting of call/notice money transactions over NDS as also to reduce reporting burden, it is decided to discontinue the practice of reporting of call/notice/term money transactions by fax to MPD with effect from December 11, 2004. However, deals between non-NDS members will continue to be reported to MPD as hitherto (Annex II). 5.3 In case the situation so warrants, Reserve Bank may call for information in respect of money market transactions of eligible participants by fax. Annex I
I. List of Institutions Permitted to Participate in the Call/Notice Money Market both as Lenders and Borrowers as on July 1, 2005
II. List of Institutions Permitted to Participate in the Call/Notice Money Market only as Lenders as on July 1, 2005 A. Financial Institutions 1. Export Credit Guarantee Corporation of India Ltd.2. Export Import Bank of India 3. Industrial Finance Corporation of India Ltd. 4.Industrial Investment Bank of India 5. National Bank for Agriculture and Rural Development 6. National Housing Bank 7. Small Industries Development Bank of India 8. Special Undertaking of Unit Trust of India 9. Tourism Finance Corporation of India
2. ICICI Prudential Life Insurance Co. 3. Life Insurance Corporation of India 4. National Insurance Co. 5. New India Assurance Co. 6. Oriental Insurance Co. 7. Royal Sundaram Alliance Insurance Co. Ltd. 8. United India Insurance Co. 9. IFFCO -TOKIO General Insurance Co. Ltd.
2. BOB Mutual Fund 3. BOI Mutual Fund 4. Birla Mutual Fund 5. Canbank Mutual Fund 6. Chola Mutual Fund 7. DSP Merrill Lynch Mutual Fund 8. Escorts Mutual Fund 9. GIC Mutual Fund 10. HDFC Asset Management Co. Ltd. 11. IDBI Mutual Fund 12. IL and FS AMC Mutual Fund 13. ING Assets Management 14. JM Capital Management 15. Jardine Fleming Mutual Fund 16. Kotak Mahindra Mutual Fund 17. LIC Mutual Fund 18. Morgan Stanley Mutual Fund 19. PNB Mutual Fund 20. Prudential ICICI Mutual Fund 21. Reliance Capital Mutual Fund 22. SBI Mutual Fund 23. Sriram Mutual Fund 24. Sun F & C Mutual Fund 25. Sundaram Mutual Fund 26. Tata Mutual Fund 27. Taurus Mutual Fund 28. Templeton Mutual Fund 29. UTI Mutual Fund 30. Standard Chartered Mutual Fund 31. SBI Offshore Mutual Fund Daily Return on Call/Notice/Term Money Market Transactions
Name of the Bank/Institution : __________________________________________ Code No.(As specified by RBI) : __________________________________________ Date : __________________________________________
* In case of outstandings, rates need not be given. @ Where applicable. ______________________ Authorised Signatories Phone No. : Annex III In these guidelines, unless the context otherwise requires: 1. 'Call Money' means deals in overnight funds. 2. 'Notice Money' means deals in funds for 2 - 14 days 3. 'Fortnight' shall mean the period from Saturday to the second following Friday, both days inclusive. 4. 'Bank' or 'banking company' means a banking company as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949 (10 of 1949) or a 'corresponding new bank', 'State Bank of India' or 'subsidiary bank' as defined in clause (da), clause (nc) and clause (nd) respectively thereof and includes a 'co-operative bank' as defined in clause (cci) of Section 5 read with Section 56 of that Act. 5. 'Scheduled bank' means a bank included in the Second Schedule of the Reserve Bank of India Act, 1934. 6. 'Primary Dealer' means a financial institution which holds a valid letter of authorisation as a Primary Dealer issued by the Reserve Bank, in terms of the 'Guidelines for Primary Dealers in Government Securities Market' dated March 29, 1995, as amended from time to time. 7. 'Capital Funds' means the sum of the Tier I and Tier II capital as disclosed in the latest audited balance sheet of the entity. List of Circulars
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