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, 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, 2004, 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 www.mastercirculars.rbi.org.in.
Yours faithfully (D. Anjaneyulu) Principal
Monetary Policy Adviser Encls.: As above
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, 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
Borrowing |
Lending |
- Scheduled Commercial Banks
- Co-operative
Banks
- Primary Dealers (PDs)
|
- Scheduled Commercial Banks
- Co-operative
Banks
- Primary Dealers (PDs)
- Select all-India Financial Institutions
- Select
Insurance Companies
- Select Mutual Funds
| 3.
Prudential Limit 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. Table 2: Prudential Limit for Transactions
in Call/Notice Money Market
Sr.
No. | Participant |
Borrowing |
Lending |
1 |
Scheduled Commercial Banks |
On a fortnightly average basis, borrowing
should not exceed 100 per cent of owned funds (i.e., total of Schedule I and Schedule
II of audited balance sheet) or 2 per cent of aggregate deposits as at the end
of March of the previous financial year, whichever is higher; however,
banks are allowed to borrow a maximum of 125 per cent of their owned funds on
any day, during a fortnight. | On
a fortnightly average basis, lending should not exceed 25 per cent of their owned
funds; however, banks are allowed to lend a maximum of 50 per cent of their owned
funds on any day, during a fortnight |
2 |
Co-operative Banks |
Borrowings by State Co-operative
Banks/District Central Co-operative Banks/Urban Co-op. Banks in call/notice money
market on a daily basis should not exceed 2.0 per cent of their aggregate deposits
as at end March of the previous financial year. | No
Limit. | 3 |
Primary Dealers (PDs) |
PDs are allowed to borrow, on average
in a reporting fortnight, up to 200 per cent of their net owned funds (NOF)
as at end-March of the previous financial year. | PDs
are allowed to lend in call/notice money market, on average in a reporting fortnight,
up to 25 per cent of their NOF. |
4 |
Financial Institutions |
Not Permitted. |
Lending is permitted, on average
in a reporting fortnight, upto 45 per cent of their average daily lending in call/notice
market during 2000-01. | 5 |
Insurance Companies |
6 |
Mutual Funds | 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.
Interest Rate 4.1 Eligible participants are free
to decide on interest rates in call/notice money market.
5. Reporting Requirement 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).
5.2 It is also 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.
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.
Annex
I I. List of Institutions Permitted
to Participate in the Call/Notice Money Market both as Lenders and Borrowers
as on July 1, 2004 - All
Scheduled Commercial Banks (excluding RRBs).
- All Co-operative Banks other
than Land Development Banks.
- All Primary Dealers (PDs)
- Discount
and Finance House of India Ltd.
- Securities Trading Corporation of India
Ltd.
- PNB Gilts Ltd.
- Gilt Securities Trading Corporation Ltd.
-
ICICI Securities and Finance Company Ltd.,
- ABN Amro Securities (India)
Pvt. Ltd.
- J.P. Morgan Securities India Pvt. Ltd.
- Kotak Mahindra
Capital Company (Unlimited)
- DSP Merrill Lynch Ltd.
- Deutsche Securities
(India) Pvt. Ltd.
- IDBI Capital Markets Services Ltd.
- Corpbank
Securities Ltd.
- HSBC Primary Dealership (India) Pvt. Ltd.
- Bank
of America Securities Pvt. Ltd.
- Standard Chartered - UTI Securities India
Pvt. Ltd.
- BoB Capital Markets Ltd.
- Citicrop Capital Markets Ltd.
II. List of Institutions Permitted to Participate in the Call/Notice
Money Market only as Lenders as on July 1, 2004 A.
Financial Institutions - Export Credit Guarantee Corporation of
India Ltd.
- Export Import Bank of India
- Industrial Development
Bank of India
- Industrial Finance Corporation of India Ltd.
- Industrial
Investment Bank of India
- National Bank for Agriculture and Rural Development
- National
Housing Bank
- Small Industries Development Bank of India
- Special
Undertaking of Unit Trust of India
- Tourism Finance Corporation of India
B. Insurance Companies - General Insurance Corporation of India
- ICICI
Prudential Life Insurance Co.
- Life Insurance Corporation of India
- National
Insurance Co.
- New India Assurance Co.
- Oriental Insurance Co.
- Royal
Sundaram Alliance Insurance Co. Ltd.
- United India Insurance Co.
-
IFFCO -TOKIO General Insurance Co. Ltd.
C. Mutual Funds
- Alliance Capital Mutual Fund
- BOB Mutual Fund
- BOI
Mutual Fund
- Birla Mutual Fund
- Canbank Mutual Fund
- Chola
Mutual Fund
- DSP Merrill Lynch Mutual Fund
- Escort Mutual Fund
- GIC
Mutual Fund
- HDFC Asset Management Co. Ltd.
- IDBI Mutual Fund
- IL
and FS AMC Mutual Fund
- ING Assets Management
- JM Capital Management
- Jardine
Fleming Mutual Fund
- Kotak Mahindra Mutual Fund
- LIC Mutual Fund
- Morgan
Stanley Mutual Fund
- PNB Mutual Fund
- Prudential ICICI Mutual Fund
- Reliance
Capital Mutual Fund
- SBI Mutual Fund
- Sriram Mutual Fund
- Sun
F & C Mutual Fund
- Sundaram Mutual Fund
- Tata Mutual Fund
- Tauras
Mutual Fund
- Templeton Mutual Fund
- UTI Mutual Fund
- Standard
Chartered Mutual Fund
- SBI Offshore Mutual Fund
Annexure
- II Daily Return on Call/Notice/Term
Money Market Transactions Name
of the Bank/Institution : __________________________________________ Code
No.(As specified by RBI) : __________________________________________
Date : __________________________________________
|
Borrowed |
Lent |
Amount (Rs. crore) |
Range of
Interest Rates (% p.a.) |
Weighted Average Interest Rates (%
p.a.) | Amount (Rs. crore) |
Range of
Interest Rates (% p.a.) |
Weighted Average Interest Rates (%
p.a.) | 1. |
Call Money (Overnight) | | | | | | |
2. |
Notice Money
(2-14 Days) |
(a) |
Transacted on the day |
| | |
| | |
(b) |
Outstanding * (including
day's transactions) |
| | |
| | |
3. |
Term Money
@ | (a) |
Transacted on the day |
| (15
Days-1 Month) | |
| |
| | |
| (1
Month-3 Months) | |
| |
| | |
| (3
Months-6 Months) | |
| |
| | |
| (6
Months-1 Year) | |
| |
| | |
(b) |
Outstanding * (Including
day's transactions) Amount
Borrowed | |
Amount Lent | |
| (15
Days-1 Month) | |
| |
(1 Month-3 Months) |
| |
| (3
Months-6 Months) | |
| |
(6 Months-1 Year) |
| |
* In case of outstandings, rates need not be given. @ Where
applicable. ______________________
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 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.
Appendix List
of Circulars
Sr.No. |
Circular Number |
Subject |
1. |
CPC.BC.103/279A-90 dated.12-4-1990 |
Access to the Call Money Market |
2. |
Ref.DBOD.No.Dir.BC.97/C.347-90 dated
April 18, 1990 | 3. |
CPC.BC.111/279A-91 dated.12-4-1991 |
Call/Notice Money and Bills Rediscounting
Market. | 4. |
CPC.BC.144/07.01.279/94-95 dated.17-4-1995 |
Widening Access to Call/Notice Money
Market | 5. |
Ref.DBOD.No.FSC.BC.68/24.91.001-95
dated June 27, 1995 | 6. |
CPC.BC.162/07.01.279/96-97 dated
April 15, 1997 | Money
Market - Routing of Transactions through DFHI |
7. | CPC.BC.165/07.01.279/97-98
dated. April 21, 1997 | Money
Market - Routing of Transactions through Primary Dealers |
8. | CPC.BC.175/07.01.279/97-98
dated April 29, 1998 | Money
Market | 9. |
CPC.BC.185/07.01.279/98-99 dated
April 20, 1999 | Measures
for Developing the Money Market - Call/Notice Money Market |
10. | Ref.No.MPD.2785/279A(MM)/98-99
dated April 24, 1999 | Call/Notice
Money and Bills Rediscounting Markets - Routing of Transaction |
11. |
CPC.BC.190/07.01.279/99-2000 dated
October 29, 1999 | Money
Market | 12. |
CPC.BC.196/07.01.279/99-2000 dated
April 27, 2000 | Money
Market | 13. |
Ref.No.MPD.3513/279A(MM)/1999-2000
dated April 28, 2000 | Call/Notice
Money and Bills Rediscounting Markets - Routing of Transactions - Extract from
the Statement on Monetary and Credit Policy for the Year 2000-01 dated April 27,
2000 | 14. |
MPD.BC.201/07.01.279/2000-01 dated
October 10, 2000 | Permission
to non-banks to lend in the call money market |
15. | MPD.BC.206/07.01.279/2000-01
dated April 19, 2000 | Moving
towards Pure Inter-bank Call Money Market |
16. | DS.PCB.CIR.40/13.01.00/2000-01
dated April 19, 2001 | Operations
in call/notice money market |
17. | MPD.2991/03.09.01/2000-01
dated April 21, 2001 | Participation
in Call/Notice Money Market |
18. | MPD.3173/03.09.01/2000-01
dated May 8, 2001 | Participation
in Call/Notice Money Market |
Sr.No. |
Circular Number |
Subject |
19. | Ref.DBOD.No.FSC.BC.125/24.92.001/2000-01
dated May 25, 2001 | Permission
to participate in Call/Notice/Term Money Market and Bills Rediscounting Scheme
- Primary Dealers | 20. |
MPD.BC.214/07.01.279/2001-02 dated
April 29, 2002 | Money
Market - Moving towards Pure Inter-bank Call Money Market |
21. | DS.PCB.CIR.52/13.01.00/2001-02
dated June 24, 2002 | Reporting
of Call Money Transactions | 22. |
MPD.217/07.01.279/2001-02 dated June
27, 2002 | Reliance
on Call/Notice Money Market: Prudential Norm |
23. | MPD.220/07.01.279/2002-03
dated July 31, 2002 | Access
to Call/Notice Money Market for Primary Dealers: Prudential Norms. |
24. |
MPD.222/07.01.279/2002-03 dated October
29, 2002 | Money
Market | 25. |
MPD.225/07.01.279/2002-03 dated November
14, 2002 | Reliance
on Call/Notice Money Market: Prudential Norm |
26. | MPD.226/07.01.279/2002-03
dated December 11, 2002 | Reliance
on Call/Notice Money Market: Prudential Norm |
27. | DBOD.FSC.BC.85/24.91.001/2002-03
dated March 26, 2003 | Permission
to participate in Call/Notice Money Market and Bills Rediscounting Scheme - Private
Sector Mutual Funds | 28. |
DBOD.FSC.BC.86/24.91.001/2002-03
dated March 26, 2003 | Permission
to participate in Call/Notice/Term Money Market and Bills Rediscounting Scheme
- Primary Dealers | 29. |
MPD.BC.230/07.01.279/2002-03 dated
April 29, 2002 | Money
Market - Moving towards Pure Inter-bank Call Money Market |
30. | MPD.BC.234/07.01.279/2002-03
dated April 29, 2003 | Participation
of Non-bank Entities in Call/Notice Money Market |
31. | MPD.BC.235/07.01.279/2002-03
dated April 29, 2003 | Reporting
of Call/Notice Money Market Transactions on NDS Platform. |
32. | MPD.BC.241/07.01.279/2003-04
dated November 3, 2003 | Money
Market - Moving towards Pure Inter-bank Call/Notice Money Market |
33. |
MPD.BC.244/07.01.279/2003-04 dated
November 5, 2003 | Primary
Dealers' Access to Call/Notice Money Market |
34. | MPD.BC.242/07.01.279/2003-04
dated November 5, 2003 | Moving
towards Pure Inter-bank Call/Notice Money Market |
35. | MPD.BC.250/07.01.279/2003-04
dated May 25, 2004 | Moving
towards Pure Inter-bank Call/Notice Money Market |
|