What changed
Previously, RBI prescribed borrowing limits for Call and Notice Money Markets. Now, Scheduled Commercial Banks (excluding small finance banks and payment banks) can set their own limits, with board approval, within prudential inter-bank liability guidelines.
What it means for you
Banks gain flexibility to manage short-term liquidity more efficiently, aligning borrowing with their own risk appetite. This reduces regulatory micromanagement but requires robust internal governance to ensure limits stay within prudential boundaries set by the Department of Regulation.
What you must do
- Review and update internal policies for Call and Notice Money Market borrowing to reflect self-set limits.
- Obtain board approval for the new borrowing limits, ensuring they comply with prudential inter-bank liability norms.
- Communicate the revised limits to treasury and risk management teams for immediate implementation.
- Monitor adherence to board-approved limits and report any breaches to the board and RBI as per existing guidelines.
Who it affects
Scheduled Commercial Banks (excluding small finance banks and payment banks), Treasury departments of eligible banks, Risk management teams of eligible banks
Which banks are excluded from this relaxation?
Small finance banks and payment banks are excluded; they must continue to follow the earlier RBI-prescribed limits for Call and Notice Money Market borrowing.
Do we need board approval for the new limits?
Yes, banks must put in place internal board-approved limits for borrowing through Call and Notice Money Markets, similar to the existing requirement for Term Money Market borrowing.
When does this change take effect?
The instruction is applicable with immediate effect from June 08, 2023, and the Master Direction has been updated accordingly.