Proposal Made by RBI Panel to Prolong Call Money Market Hours Until 7 PM
Extending Trading Hours for Mumbai's Call Money Market
Hey there! Let's talk about some big news in Mumbai's financial scene. A crew led by the Reserve Bank of India (RBI) has proposed extending the trading hours for the call money market, keeping it open till 7 p.m., instead of the current 5 p.m. This shift is all about helping banks handle their funds more effectively, meeting the needs of the real-time payment system.
But don't worry, this change won't impact the trading hours for other financial markets like government securities, interest rate derivatives, or foreign exchange markets. This group, chaired by Radha Shyam Ratho, an Executive Director at the RBI, has been cooking up this plan since the RBI's monetary policy review earlier this year.
The report brought attention to standalone primary dealers (SPDs) requesting a longer trading window in the call money market. They also recommended extending the reporting window, including for cancelled transactions, until 7.30 p.m.
The group's report highlighted some impressive growth in the overnight money market over the past decade. Between 2014-15 and 2024-25, the annual turnover in this market skyrocketed from Rs 281.37 lakh crore to Rs 1,324.05 lakh crore, with a daily average turnover increase from Rs 1.17 lakh crore to Rs 5.52 lakh crore. This surge was mainly due to the growth in the collateralized segment of the market.
In addition, the turnover in this segment went up from Rs 245.27 lakh crore to Rs 1,296.62 lakh crore during the same period, while the turnover in the uncollateralized call money market dipped slightly.
Interestingly, the call money market is open only to banks and standalone primary dealers, with access to the RBI's liquidity adjustment facilities. Co-operative banks are the primary lenders, while SPDs are the main borrowers.
Now, here's the kicker - this move could enhance liquidity management efficiency for banks and financial institutions, aligning operations with global markets and digital banking demands. This would allow participants to handle overnight funds more effectively, potentially reducing dependency on less-regulated alternatives. So, stay tuned for more updates on this evolving financial landscape!
Insights:- This adjustment reflects India’s evolving financial infrastructure needs amid round-the-clock transaction flows.- Improved liquidity access allows banks to address 24/7 payment system demands and unforeseen cash requirements later in the day.- Increased reliance on RBI-regulated call money markets may reduce systemic risks compared to unofficial lending channels.- Extended repo/TREPS trading until 4 PM (complementing the call money extension) supports seamless fund transitions between markets.
- The Reserve Bank of India (RBI) is mainly extending the trading hours for Mumbai's call money market, aiming to keep it open till 7 p.m., in an effort to boost liquidity management efficiency for banks and financial institutions.
- The overnight money market has seen significant growth over the past decade, with the annual turnover surging from Rs 281.37 lakh crore to Rs 1,324.05 lakh crore, largely due to the growth in the collateralized segment of the market, as mentioned in the group's report led by Radha Shyam Ratho, an Executive Director at the RBI.
- The call money market, open only to banks and standalone primary dealers, could potentially reduce dependency on less-regulated alternatives by allowing participants to handle overnight funds more effectively, as a result of this extension.
- This adjustment could align operations with global markets and digital banking demands, a crucial move in today's industry of finance and banking-and-insurance as India's financial infrastructure adapts to round-the-clock transaction flows.
