Master Directions

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Master Direction - Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021

RBI/2021-22/78
FMRD.DIRD.01/14.01.001/2021-22

April 01, 2021

To,

All Eligible Market Participants

Madam/Sir,

Master Direction - Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021

Please refer to Paragraph 6 of the Statement on Developmental and Regulatory Policies, Reserve Bank of India, issued as part of the second Bi-monthly Monetary Policy Statement for 2019-20 dated June 06, 2019 regarding Comprehensive Review of Money Market Directions.

2. The draft Directions were released for public comments on December 04, 2020. Based on the feedback received from the market participants, the Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021 were reviewed and have since been finalised. The Directions are enclosed herewith.

Yours faithfully,

(Dimple Bhandia)
Chief General Manager


FINANCIAL MARKETS REGULATION DEPARTMENT
Notification No. FMRD.DIRD.02 /14.01.001/2021-22 dated April 01, 2021

Master Direction- Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021

In exercise of the powers conferred under section 45W of the Reserve Bank of India Act, 1934 (hereinafter called the Act) read with section 45U of the Act and of all the powers enabling it in this behalf and in supersession of Section I of the FMRD Master Direction No. 2/2016-17 dated July 07, 2016, Direction No. FMRD.DIRD.09/14.01.001/2018-19 dated October 29, 2018 and Direction No. FMRD.DIRD.01/14.01.001/2020-21 dated December 04, 2020, the Reserve Bank of India (hereinafter called the Reserve Bank), hereby issues the following Directions to all persons and agencies eligible to deal in Call, Notice and Term Money Markets.

1. Short title and commencement

(a) These Directions shall be called the Master Direction- Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021.

(b) These Directions shall come into force with effect from April 05, 2021.

2. Definitions

(a) For the purpose of these Directions, unless the context otherwise requires:

(i) “Bank” means a banking company (including a Payment Bank and a Small Finance Bank) as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 or a “regional rural bank”, a “corresponding new bank” or “State Bank of India” as defined in clauses (ja), (da) and (nc), of section 5 respectively thereof, or a “cooperative bank” as defined in clause (cci) of section 5 read with section 56 of the said Act;

(ii) “Call Money” means borrowing or lending in unsecured funds on overnight basis;

(iii) “Capital Funds” shall have the meaning assigned in the applicable capital regulations issued by the Department of Regulation of the Reserve Bank as amended from time to time and shall be calculated as per the latest audited balance sheet;

(iv) “Electronic Trading Platform” or “ETP” shall have the meaning assigned in paragraph 2 (1) (iii) of the Electronic Trading Platform (Reserve Bank) Directions, 2018 dated October 05, 2018, as modified from time to time;

(v) “Exchange” shall mean ‘recognised stock exchange’ and shall have the same meaning as assigned to in Section 2 (f) of the Securities Contract Regulation Act, 1956.

(vi) “Fortnight” shall have the meaning assigned to it under section 42 of the Reserve Bank of India Act, 1934;

(vii) “Negotiated Dealing System-CALL” or “NDS-CALL” is the electronic trading platform for execution and reporting of transactions in Call, Notice and Term Money Markets;

(viii) “Net Owned Fund” shall have the meaning assigned to it under the Explanation to section 45-IA of the Reserve Bank of India Act, 1934;

(ix) “Notice Money” means borrowing or lending in unsecured funds for tenors up to and inclusive of 14 days excluding overnight borrowing or lending;

(x) “Over-the-Counter markets” or “OTC markets” refers to markets where transactions are undertaken in any manner other than on exchanges and shall include those executed on electronic trading platforms;

(xi) “Payment Bank” means a bank licensed under section 22 of the Banking Regulation Act, 1949 and governed by the terms of the “Reserve Bank Guidelines for Licensing of Payments Banks” dated November 27, 2014, as amended from time to time;

(xii) “Primary Dealer” means a Non-Banking Financial Company that holds a letter of authorisation issued by the Reserve Bank to act as a Primary Dealer, in terms of the "Guidelines for Primary Dealer in Government Securities Market" dated March 29, 1995, as amended from time to time;

(xiii) “Small Finance Bank” means a bank licensed under section 22 of the Banking Regulation Act, 1949 and governed by the terms of the “Reserve Bank Guidelines for Licensing of Small Finance Banks” dated November 27, 2014, as amended from time to time;

(xiv) “Term Money” means borrowing or lending in unsecured funds for periods exceeding 14 days and up to one year.

(b) Words and expressions used but not defined in these Directions shall have the meaning assigned to them in the Reserve Bank of India Act, 1934.

3. Participants

The following entities shall be eligible to participate in the Call, Notice and Term Money Markets, both as borrowers and lenders:

(a) Scheduled Commercial Banks (excluding Local Area Banks);

(b) Payment Banks;

(c) Small Finance Banks;

(d) Regional Rural Banks;

(e) State Co-operative Banks, District Central Co-operative Banks and Urban Co-operative Banks (hereinafter Co-operative Banks); and

(f) Primary Dealers.

4. Prudential limits

(a) Prudential limits in respect of outstanding lending transactions in the Call, Notice and Term Money Markets shall be decided by the participants with the approval of their Board within the regulatory framework of the exposure norms prescribed by the Department of Regulation of the Reserve Bank for the eligible participant concerned.

(b) Prudential limits for outstanding borrowing transactions in the Call, Notice and Term Money Markets are set out in Table 1.

Table 1: Prudential limits for outstanding borrowing transactions in Call, Notice and Term Money Markets
Sr. No. Participant category Prudential limit
1. Scheduled Commercial Banks, Payment Banks, Small Finance Banks and
Regional Rural Banks

(i) 100% of capital funds, on a daily average basis in a reporting fortnight, and

(ii) 125% of capital funds on any given day.

2. Co-operative Banks

(i) 2.0% of aggregate deposits as at the end of the previous financial year.

3. Primary Dealers

(i) 225% of Net Owned Fund (NOF) as at the end of previous financial year.

(c) Eligible participants may, with the approval of their respective Board of Directors (or equivalent bodies), fix separate internal limits within the prudential limits for borrowing and lending in the Call, Notice and Term Money Markets. The internal limits so arrived at by the eligible participants shall be conveyed to the Clearcorp Dealing System Ltd., or any other NDS-CALL system operator authorised by the Reserve Bank for setting of limits in the NDS-CALL platform, under advice to the Financial Markets Regulation Department (FMRD) of the Reserve Bank through e-mail.

5. General guidelines

(a) Interest rates: Eligible participants are free to decide on interest rates in the Call, Notice and Term Money Markets.

(b) Trading venues: Call, Notice and Term Money transactions shall be executed in Over-the-Counter markets, including on the NDS-CALL platform or any other Electronic Trading Platform authorised for the purpose by the Reserve Bank.

(c) Market timings: The market timings for Call, Notice and Term Money transactions shall be from 9:00 AM to 5:00 PM on each business day or as specified by the Reserve Bank from time to time.

(d) Market practices and documentation: Eligible participants shall follow the standard market practices, methodologies and documentation prescribed by Fixed Income Money Market and Derivatives Association of India (FIMMDA), in consultation with the Reserve Bank, from time to time.

6. Cancellation and termination

(a) A Call, Notice or Term Money transaction shall, normally, not be cancelled.

(b) A Notice or Term Money transaction can be terminated before maturity at a mutually agreed price.

(c) Any cancellation or termination of a Call, Notice or Term Money transaction shall be reported as set out in paragraph 7 of these Directions.

7. Reporting requirements

(a) All Call, Notice or Term Money transactions, other than those executed on NDS-CALL platform, shall be reported to the NDS-CALL platform within 15 minutes of execution (the time when interest rate is agreed), by both counterparties to the transaction or by the Electronic Trading Platform concerned, as the case may be. For this purpose, all eligible participants in the Call, Notice and Term Money Markets shall obtain membership of NDS-CALL platform. Eligible participants who are not members of NDS-CALL platform shall obtain such membership within a period of six months from the date of these Directions.

(b) A Call, Notice or Term Money transaction executed on the NDS-CALL platform need not be reported separately.

(c) Any cancellation or termination of a Call, Notice and Term Money transaction shall be reported on the NDS-CALL platform within 15 minutes of cancellation by each counterparty to the transaction or by the Electronic Trading Platform concerned, as the case may be.

(d) Any misreporting or multiple reporting of the same OTC markets deal by a counterparty shall be immediately brought to the notice of the Clearcorp Dealing System Ltd., or any other NDS-CALL system operator authorised by the Reserve Bank and also to the Financial Markets Regulation Department, Reserve Bank of India, Central Office, Fort, Mumbai, through email.

8. Obligation to provide information sought by the Reserve Bank: The Reserve Bank may call for any information or statement or seek any clarification, which in the opinion of the Reserve Bank is relevant, from persons or agencies dealing in the Call, Notice and Term Money Markets, including eligible participants, and such persons, agencies and participants shall furnish such information, statement or clarification.

9. Dissemination of data: The Reserve Bank or any other person authorised by the Reserve Bank, may publish any anonymised data related to transactions in Call, Notice and Term Money Markets.

10. Violation of Directions: In the event of any person or agency violating any provision of these Directions or the provisions of any other applicable law, the Reserve Bank may, in addition to taking any penal or regulatory action in accordance with law, disallow that person or agency from dealing in the Call, Notice and Term Money Markets for a period not exceeding one month at a time, after providing reasonable opportunity to the person or agency to defend its actions, and such action may be made public by the Reserve Bank.

11. These Directions shall apply to Call, Notice and Term Money transactions entered into from the date these Directions come into force. Provisions of Section I of the FMRD Master Direction No. 2/2016-17 dated July 07, 2016; Direction No. FMRD.DIRD.09/14.01.001/2018-19 dated October 29, 2018 and Direction No. FMRD.DIRD.01/14.01.001/2020-21 dated December 04, 2020, shall continue to be applicable to transactions undertaken in accordance with the said Directions till the expiry of those contracts.


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