What changed
RBI issued a master circular consolidating all existing guidelines on call/notice money market operations issued up to June 30, 2005, dated July 1, 2005. This circular updates and replaces previous individual circulars, providing a single reference document for eligible institutions.
What it means for you
Banks and primary dealers now have a unified set of rules for call/notice money market transactions, including borrowing and lending limits based on capital funds. Non-bank institutions like select all-India Financial Institutions, insurance companies, and mutual funds can only lend, not borrow, and are being phased out completely (except PDs) from August 6, 2005, to make the market purely inter-bank.
What you must do
- Review the master circular to ensure your institution's call/notice money market operations comply with the consolidated guidelines.
- Monitor borrowing and lending limits: for scheduled commercial banks, borrowing on a fortnightly average basis must not exceed 100% of capital funds, with a daily cap of 125%; lending on a fortnightly average must not exceed 25%, with a daily cap of 50%.
- Ensure non-bank participants (e.g., insurance companies, mutual funds) are only acting as lenders, not borrowers, in the call/notice money market.
- Update internal reporting formats to align with the annexes provided in the master circular.
Who it affects
Scheduled Commercial Banks (excluding RRBs), Co-operative Banks, Primary Dealers, Select All-India Financial Institutions, Select Insurance Companies, Select Mutual Funds
Can non-bank institutions borrow in the call/notice money market?
No, non-bank institutions like select all-India Financial Institutions, insurance companies, and mutual funds can only lend in this market. Only banks and primary dealers can both borrow and lend.