What changed
Previously, RRBs were not allowed to participate in the call/notice/term money market. Now, they can act as both borrowers and lenders in these markets, subject to the same prudential limits and guidelines that apply to Scheduled Commercial Banks under the RBI Master Direction on money market instruments.
What it means for you
This opens a new liquidity management tool for RRBs, allowing them to better manage short-term fund surpluses or deficits. It also increases depth and participation in the money market, potentially improving rate discovery and competition. Banks should note that RRBs will now be direct counterparties in these markets, requiring updated credit and operational assessments.
What you must do
- Update internal policies to treat RRBs as eligible counterparties in call/notice/term money market transactions.
- Review and align RRB-specific prudential limits with those applicable to Scheduled Commercial Banks as per the Master Direction.
- Ensure compliance teams are aware of the immediate effective date and the contact details for RBI's Financial Market Regulation Department.
Who it affects
Regional Rural Banks (RRBs), Scheduled Commercial Banks, Other eligible market participants in the call/notice/term money market
Can RRBs now borrow and lend in the call money market?
Yes, RRBs are permitted to participate both as borrowers and lenders in the call/notice/term money market, effective immediately.
What prudential limits apply to RRBs in this market?
The same prudential limits and guidelines that apply to Scheduled Commercial Banks under the RBI Master Direction on money market instruments, as amended, will apply to RRBs.
Who should RRBs contact for further details?
RRBs may approach the Chief General Manager, Financial Market Regulation Department, RBI Central Office, Mumbai, via email at [email protected].