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Master Circular on Call/Notice Money Market Operations

RBI/2015-16/55
FMRD.DIRD. 01 /14.01.001/2015-16

July 1, 2015

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

Dear Sir/Madam,

Master Circular on Call/Notice Money Market Operations

The Reserve Bank of India has, from time to time, issued a number of guidelines/instructions/directives to banks and the Primary Dealers in regard 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 for reference of the market participants and others concerned. It may be noted that this Master Circular consolidates and updates all the instructions/guidelines contained in the circulars listed in the Appendix in so far as they relate to operations of eligible institutions in the call/notice money market. This Master Circular has also been placed on the RBI website at www.mastercirculars.rbi.org.in.

Yours faithfully

(R. Subramanian)
Chief General Manager

Encls.: As above


Table of Content
Sl. No. Topic
1 Introduction
2 Participants
3 Prudential Limits
4 Interest Rate
5 Dealing Session
6 Documentation
7 Reporting requirement
Annexes
I. Reporting Format
II. Definitions
Appendix: List of circulars consolidated

1. Introduction

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 into money 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 an overnight basis and under notice money market, funds are transacted for a period between 2 days and 14 days.

2. Participants

Scheduled commercial banks (excluding RRBs), co-operative banks (other than Land Development Banks) and Primary Dealers (PDs), are permitted to participate in call/notice money market both as borrowers and lenders.

3. Prudential Limits

3.1 The prudential limits in respect of both outstanding borrowing and lending transactions in call/notice money market for scheduled commercial banks, co-operative banks and PDs are as follows:-

Table: Prudential Limits for Transactions in Call/Notice Money Market
Sr. No. Participant Borrowing Lending
1 Scheduled Commercial Banks
On a fortnightly average basis, borrowing outstanding should not exceed 100 per cent of capital funds (i.e., sum of Tier I and Tier II capital) of latest audited balance sheet. However, banks are allowed to borrow a maximum of 125 per cent of their capital funds on any day, during a fortnight.
On a fortnightly average basis, lending outstanding should not exceed 25 per cent of their capital funds. However, banks are allowed to lend a maximum of 50 per cent of their capital funds on any day, during a fortnight.
2 Co-operative Banks
Outstanding borrowings of State Co-operative Banks/District Central Co-operative Banks/ Urban Co-operative 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 PDs
PDs are allowed to borrow, on average in a reporting fortnight, up to 225 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.

3.2 Banks/PDs/ Co-operative banks may, with the approval of their Boards, arrive at the prudential limits for borrowing/lending in Call/Notice Money Market in terms of guidelines given in paragraph 3.1 above. The limits so arrived at may be conveyed to the Clearing Corporation of India Ltd. (CCIL) for setting of limits in NDS-CALL System, under advice to Financial Markets Regulation Department (FMRD), Reserve Bank of India.

3.3 Non-bank institutions (other than PDs) are not permitted in the call/notice money market.

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 the methodology given in the Handbook of Market Practices brought out by the Fixed Income Money Market and Derivatives Association of India (FIMMDA).

5. Dealing Session

Deals in the Call/Notice/Term money market can be done from 9:00 am to 5:00 pm on weekdays and from 9:00 am to 2:00 pm on Saturdays or as specified by RBI from time to time.

6. Documentation

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

7. Reporting Requirement

7.1 All dealings in Call/Notice/Term money executed on the Negotiated Dealing System-Call, i.e. NDS-Call (a screen –based, negotiated, quote-driven system), do not require separate reporting.

7.2 It is mandatory that all the OTC Call/Notice/Term money deals be reported over the reporting platform of NDS-Call by the parties who are having NDS-Call membership.

7.3 Such OTC deals should be reported within 15 minutes on NDS-Call reporting platform, irrespective of the size of the deal or whether the counterparty is a member of the NDS-Call or not.

7.4 Parties who are not having NDS-Call membership are advised to report the deals to Financial Markets Regulation Department, RBI in the reporting format given in Annex I of this master circular.

7.5 The reporting time for all OTC Call/Notice/Term money deals on NDS-Call is up to 5:00 pm on weekdays and 2:00 pm on Saturdays or as decided by RBI from time to time.

7.6 In case of any misreporting or repeated reporting of OTC deals by a party, the same should be immediately brought to the notice of Financial Markets Regulation Department either through e-mail or through fax (022-22702290).

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

Appendix

List of Circulars Consolidated

Sr. No. Circular Number Subject
1. CPC.BC.103/279A-90 dated April 12,1990 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 April 12, 1991 Call/Notice Money and Bills Rediscounting Market
4. CPC.BC.144/07.01.279/94-95 dated April 17,1995 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
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
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
36. MPD.BC.253/07.01.279/2004-05 dated July 3, 2005 Master Circular on Call/Notice Money Market Operations
37. MPD.BC.259/07.01.279/2004-05 dated October 26, 2004 Moving towards Pure Inter-bank Call/Notice Money Market
38. MPD.BC.260/07.01.279/2004-05 dated December 10, 2004 Reporting of Call/Notice Money Market Transactions
39. MPD.BC.265/07.01.279/2004-05 dated April 29, 2005 Call/Notice Money Market – Review of Benchmark
40. MPD.BC.266/07.01.279/2004-05 dated April 29, 2005 Participation in Call/Notice Money Market
41. MPD.BC.267/07.01.279/2004-05 dated April 29, 2005 Reporting of Term Money Transactions on NDS Platform
42. IDMD.PDRD.No. 1096/ 03.64.00/ 2009-10 dated September 02, 2009 Stand-alone Primary Dealers – Increase in Call/Notice Money Borrowing Limit
43. FMD.MSRG. No.71/02.02.001/2012-13 dated September 25, 2012 Reporting of OTC Call/Notice/Term Money transactions
44. IDMD/PCD.No.11/14.01.01/2013-14 dated Feb 26, 2014 Call/Notice Money Market Operations

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