RBI/2004-05/14
Ref. MPD. No.253 /07.01.279/2004-05

July 3, 2004
Aashadha 12, 1926(S)

The Chairmen/Chief Executives of all Scheduled Commercial Banks (excluding RRBs) / Co-operative Banks / Primary Dealers/ Financial Institutions/ Insurance Companies/ Mutual Funds

Dear Sirs,

Yours faithfully

(D. Anjaneyulu)
Principal Monetary Policy Adviser

Encls.: As above

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.

2.1 Participants in call/notice money market currently include banks, Primary Dealers (PDs), development finance institutions, 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).

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, 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.

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.

3.4 In case any eligible institution has genuine difficulty in deploying its excess liquidity, RBI may consider providing temporary permission to lend a higher amount in call/notice money market for a specific period on a case-by-case basis.

4.1 Eligible participants are free to decide on interest rates in call/notice money market.

5.1 To facilitate monitoring of an entity's operations in call/notice money market on a daily basis, the daily return should be submitted on a daily basis to the Monetary Policy Department, Reserve Bank of India, Central Office, Mumbai by 2.30 P. M. on weekdays and 1.30 P.M. on Saturdays (Annex II).

5.3 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.

1. All Scheduled Commercial Banks (excluding RRBs).
2. All Co-operative Banks other than Land Development Banks.
3. All Primary Dealers (PDs)
1. Discount and Finance House of India Ltd.
2. Securities Trading Corporation of India Ltd.
3. PNB Gilts Ltd.
4. Gilt Securities Trading Corporation Ltd.
5. ICICI Securities and Finance Company Ltd.,
6. ABN Amro Securities (India) Pvt. Ltd.
7. J.P. Morgan Securities India Pvt. Ltd.
8. Kotak Mahindra Capital Company (Unlimited)
9. DSP Merrill Lynch Ltd.
10. Deutsche Securities (India) Pvt. Ltd.
11. IDBI Capital Markets Services Ltd.
12. Corpbank Securities Ltd.
13. HSBC Primary Dealership (India) Pvt. Ltd.
14. Bank of America Securities Pvt. Ltd.
15. Standard Chartered - UTI Securities India Pvt. Ltd.
16. BoB Capital Markets Ltd.
17. Citicrop Capital Markets Ltd.

1. Export Credit Guarantee Corporation of India Ltd.
2. Export Import Bank of India
3. Industrial Development Bank of India
4. Industrial Finance Corporation of India Ltd.
5. Industrial Investment Bank of India
6. National Bank for Agriculture and Rural Development
7. National Housing Bank
8. Small Industries Development Bank of India
9. Special Undertaking of Unit Trust of India
10. Tourism Finance Corporation of India

1. General Insurance 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.

1. Alliance Capital Mutual Fund
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. Escort 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. Tauras Mutual Fund
28. Templeton Mutual Fund
29. UTI Mutual Fund
30. Standard Chartered Mutual Fund
31. SBI Offshore Mutual Fund

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. :

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. "Owned Funds" means the aggregate of the Schedule I and Schedule II as disclosed in the latest balance sheet of the entity.