The Reserve Bank of India (RBI) on Thursday proposed allowing non-banking financial companies (NBFCs), housing finance companies (HFCs), All India Financial Institutions (AIFIs), and corporates to access the term money market, which has been largely limited to banks and standalone primary dealers. The central bank aims to deepen liquidity and improve the transmission of monetary policy across different interest-rate tenors, according to a statement released on June 25.
The RBI has invited comments from stakeholders and market participants on the draft directions by July 25. The proposal also includes raising borrowing flexibility for primary dealers. This expansion is part of the central bank’s efforts to broaden participation in India’s short-term funding markets and strengthen monetary policy implementation. The move was detailed in a release by the RBI, which highlighted the need for a more inclusive term money market.
Opening the term money market to a wider set of participants is expected to enhance liquidity in the system and provide more options for short-term funding. Currently, the market is dominated by banks and standalone primary dealers, limiting access for other financial entities. By including NBFCs, AIFIs, and corporates, the RBI seeks to create a more diversified and resilient market structure. This step aligns with broader reforms aimed at improving financial market depth and efficiency in India.
The RBI’s draft directions are open for public consultation until July 25. Market participants and stakeholders are encouraged to submit their feedback within this period, after which the central bank will finalize the framework for expanded access to the term money market.