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Current Affairs

RBI Proposes to Widen Participation in India's Term Money Market

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On June 25, 2026, the Reserve Bank of India (RBI) issued draft proposals to expand participation in the term money market by allowing non-banking financial companies (NBFCs), including housing finance companies (HFCs), All India Financial Institutions (AIFIs), and companies to participate as borrowers and/or lenders. The proposals also include extending market hours and implementing stricter reporting requirements to enhance liquidity and monetary policy transmission.

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Key Facts

  • The RBI released draft proposals on June 25, 2026, targeting broader participation in the term money market.
  • New participants allowed include NBFCs (excluding base-layer NBFCs), HFCs, AIFIs, and companies (permitted as lenders).
  • Borrowing limits are set prudentially: NBFCs and HFCs capped at 200% of their net owned funds; standalone primary dealers may borrow up to 400% through term money and inter-corporate deposits combined.
  • Market trading hours are extended from 9 AM–5 PM to 9 AM–7 PM on business days, increasing trading flexibility and liquidity.
  • All transactions in call, notice, and term money markets executed outside the NDS-CALL platform must be reported within 15 minutes, ensuring market transparency and regulatory oversight.
  • The draft framework invites comments from stakeholders until July 17, 2026.
  • The term money market involves unsecured borrowings and lending for tenures longer than 14 days and up to one year.

Background & Context

The term money market in India traditionally had limited participation mainly by banks and standalone primary dealers. By enabling NBFCs, HFCs, AIFIs, and companies to enter this space, the RBI aims to deepen market liquidity and strengthen monetary policy transmission mechanisms. This segment provides an important link between the overnight money market and longer maturity funds.

The Reserve Bank of India, established in 1935 under the Reserve Bank of India Act, 1934, is the central regulatory authority responsible for guiding and supervising money markets in India.

Why This Matters for Exams

This regulatory development is significant for understanding the structural reforms in India's financial markets. Exams may focus on new eligible participants, borrowing limits, market hours, reporting compliance, and the role of the RBI in enhancing market efficiency and liquidity. Understanding the term money market and its place in monetary policy frameworks is crucial.

Points to Remember

  • RBI's draft proposal dated June 25, 2026, extends term money market participation.
  • NBFCs (excluding base-layer), HFCs, AIFIs allowed to borrow and lend; companies allowed as lenders.
  • Borrowing limits: NBFCs/HFCs capped at 200% net owned funds; standalone primary dealers up to 400% through combined term money and inter-corporate deposits.
  • Extended market hours from 9 AM–5 PM to 9 AM–7 PM for business days.
  • Mandatory transaction reporting within 15 minutes to NDS-CALL platform for trades outside the platform; membership mandated within six months for non-members.
  • Term money market funds are for tenures between >14 days and up to one year.
  • Fiscal oversight and liquidity management benefits anticipated.
  • Stakeholders invited to comment by July 17, 2026.
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