The Reserve Bank of India vide its notification dated 4th December 2020 has permitted regional rural banks to participate in the call/notice and term money markets both as borrowers and lenders.
The Regional Rural Banks were earlier not permitted to access the liquidity windows of the Reserve Bank as well as the call/notice money market however two new measures where proposed to address these issues. (i) In order to facilitate more efficient liquidity management by the RRBs at competitive rates, it has been decided to extend the Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) to RRBs. (ii) It has also been decided to permit the RRBs to participate in the Call/Notice money market, both as borrowers and lenders.
The Prudential Limits for Transactions in Call/Notice Money Market shall be as follows:
On a daily average basis in a reporting fortnight, borrowing outstanding should not exceed 100 percent of capital funds (i.e., the sum of Tier I and Tier II capital) of the latest audited balance sheet. However, banks are allowed to borrow a maximum of 125 percent of their capital funds on any day, during a fortnight, and for lending outstanding should not exceed 25 per cent of their capital funds.
All dealings in Call/Notice/Term money executed on the Negotiated Dealing System-Call, i.e. NDS-Call do not require separate reporting and 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.
