RBI/2007-2008/13
FMD. MSRG. No. 16/02.02.001/2007-08

July 2, 2007 Aashadha 11, 1929 (S)

The Chairmen/Chief Executives of
all Scheduled Commercial Banks (excluding RRBs)/
Co-operative Banks/Primary Dealers

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, 2007, 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

(Chandan Sinha)
Chief General Manager

Master Circular

Call/Notice Money Market Operations

Table of Contents

1. Introduction
2. Participants
3. Prudential Limits
4. Interest Rate
5. Dealing Session
6. Documentation
7. Reporting requirement
8. Annexes
I. List of institutions permitted in Call/Notice Money Market
II. Reporting Format
III. Definitions
9. Appendix: List of Circulars

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 (excluding RRBs) and Primary Dealers (PDs), both as borrowers and lenders Annex I).

3. Prudential Limits

3.1 Theprudential limits in respect of both outstanding borrowing and lending transactions in call/notice money market for banks and PDs are as follows:-

Table 1: Prudential Limits for Transactions in Call/Notice Money Market

3.2 Non-bank institutions are not permitted in the call/notice money market with effect from August 6, 2005.

4. Interest Rate

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

4.2 Calculation of interest payable would be based on FIMMDA’s (Fixed Income Money Market and Derivatives Association of India) Handbook of Market Practices.

5. Dealing Session

5.1 Deals in the call/notice money market can be done upto 5.00 pm on weekdays and 2.30 pm on Saturdays or as specified by RBI from time to time.

6. Documentation

6.1 Eligible participants may adopt the documentation suggested by FIMMDA from time to time.

7. Reporting Requirement

7.1 All dealings in call/notice money on screen-based negotiated quote-driven system (NDS-CALL) launched since September 18, 2007 do not require separate reporting. It is mandatory for all Negotiated Dealing System (NDS) members to report their call/notice money market deals (other than those done on NDS-CALL) 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.

7.2 The reporting time on NDS is upto 5.00 pm on weekdays and 2.30 pm on Saturdays or as decided by RBI from time to time.

7.3 With the stabilisation of reporting of call/notice money transactions over NDS as also to reduce reporting burden, the practice of reporting of call/notice/term money transactions by fax to RBI has been discontinued with effect from December 11, 2004. However, deals between non-NDS members will continue to be reported to the Financial Markets Department (FMD) of RBI by fax as hitherto (Annex II).

7.4 In case the situation so warrants, Reserve Bank may call for information in respect of money market transactions of eligible participants by fax.

8. Annexes

Annex I

1. List of Institutions Permitted to Participate in the Call/Notice

Money Market both as Lenders and Borrowers as on July 1, 2005

a) All Scheduled Commercial Banks (excluding RRBs).
b) All Co-operative Banks other than Land Development Banks.
c) All Primary Dealers ( PDs ).

Annex - II

Daily Return on Call/Notice/Term Money Market Transactions

To

The Chief General Manager,
Financial Markets Department,
10th Floor NCOB, RBI,
Mumbai-400001
Fax-91-22-22634824

Name of the Bank/Institution            :            __________________________________________

Code No.(As specified by RBI)      :            __________________________________________

Date            :            __________________________________________

______________________
Authorised Signatories

Phone No. :

Annex III

Definitions

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 be on a reporting Friday basis and 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.

Appendix

List of Circulars