RBI proposes to further enhance money market participation, liquidity

way2barak, June 26: The Reserve Bank of India (RBI) on Thursday proposed a series of measures aimed at improving liquidity and participation in the term money market, while also seeking to streamline rules governing secondary market transactions in government securities.

In a draft Master Direction on call, notice and term money markets, the central bank proposed giving market participants greater flexibility in setting prudential limits for lending transactions.

“Prudential limits in respect of outstanding lending transactions in the call, notice and term money markets should be decided by the participants with the approval of their Board,” the RBI said in the draft Master Direction – Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2026.

The central bank clarified that regulated entities would continue to be governed by existing exposure norms.

“In case of regulated entities, the prudential limits shall be within the regulatory framework of the exposure norms prescribed by the Department of Regulation of the Reserve Bank for the entity concerned,” the draft said.

The RBI noted that a more active term money market would provide an additional funding avenue for market participants and support better transmission of monetary policy across different interest rate tenures.