NBFCs, HFCs Set to Join Term Money Market

The Reserve Bank of India (RBI) has proposed widening participation in the term money market, which is currently limited to banks and standalone primary dealers. Under the draft framework, NBFCs (excluding base‑layer), housing finance companies (HFCs), All India Financial Institutions (AIFIs), and corporates will be allowed entry, significantly expanding the pool of borrowers and lenders. Policy Transmission & Liquidity: The move is aimed at deepening liquidity and strengthening the transmission of monetary policy across different interest‑rate tenors. By broadening participation, RBI expects improved price discovery and more efficient functioning of maturities beyond overnight borrowing. Borrowing Limits & Prudential Caps: The draft guidelines propose revised borrowing limits. Standalone primary dealers may borrow up to 400% of net owned funds via term money and inter‑corporate deposits combined, while their call/notice money borrowing cap remains at 225%. NBFCs and HFCs will have a cap of 200% of net owned funds, and AIFIs will operate under board‑approved limits within regulatory exposure norms. Operational Framework: Transactions will remain interest‑rate negotiated and can be executed either over‑the‑counter or on authorized electronic trading platforms. Proposed market hours are 9 am to 7 pm, extending beyond the current 9 am to 5 pm window for call money markets. Transparency & Reporting: To enhance oversight, all call, notice, and term money transactions executed outside the RBI‑operated NDS‑CALL platform must be reported to the system within 15 minutes of execution. This is expected to improve transparency and regulatory monitoring. Next Steps: RBI has invited stakeholder comments on the draft directions by 25 July 2026. Market participants view the proposal as a structural reform that could reshape India’s unsecured money market by diversifying participants and strengthening monetary policy effectiveness.