RBI/2005/446
REF: No. MPD. BC.267 /07.01.279/ 2004-05
April 29, 2005
Vaishakha 08, 1927(S)
To
All Scheduled Banks, Primary Dealers and select Financial Institutions
Dear Sirs
Reporting of Term Money Transactions on NDS
Platform
Please refer to paragraph 72 (i) of the annual
policy Statement for the year 2005-06 (copy of the paragraph enclosed).
In order to improve transparency, effective from the fortnight beginning April
30, 2005, NDS members are required to report their term money deals on NDS.
Yours faithfully
(Deepak Mohanty)
Adviser-in-charge
Extract from Governor's Annual Policy Statement
for the year 2005-06
Money Market
Framework for Development of Money Market
72. Money market provides a focal point for
the central bank’s operations in influencing system liquidity and thereby transmitting
the monetary policy impulses. The broad policy objectives that are being pursued
for the development of money market include ensuring stability in short-term
interest rates, minimising default risk and achieving a balanced development
of various segments of the money market. In order to review the recent developments
and current status of money market in the context of evolving monetary policy
framework, fiscal scenario, regulatory regime and extent of financial integration,
both domestic and external, a Technical Group on Money Market was constituted.
The Report of the Group was discussed in the Technical Advisory Committee on
Money, Foreign Exchange and Government Securities Markets (TAC) and certain
recommendations have been accepted for implementation. Accordingly, the following
measures are proposed:
i. Call/Notice/Term Money Market
- With effect from the fortnight beginning June 11, 2005,
non-bank participants, except PDs, would be allowed to lend, on average
in a reporting fortnight, up to 10 per cent of their average daily lending
in call/notice money market during 2000-01.
- With effect from August 6, 2005, non-bank participants,
except PDs, would be completely phased out from the call/notice money market.
- With effect from the fortnight beginning April 30,
2005, the benchmark for fixing prudential limits on exposures to call/notice
money market in the case of scheduled commercial banks would be linked
to their capital funds (sum of Tier I and Tier II capital).
- From April 30, 2005, all NDS members are required to report
their term money deals on NDS platform.
- A screen-based negotiated quote-driven system for all
dealings in call/notice and term money market transactions is proposed.