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RBI limits SCBs' daily lending to call market at 25% NoF

CREDIT POLICY

The central bank has announced a series of measures to regulate the call money market.

The statement on Monetary Policy for the first half of 2002-03 said: "Depending on the date when NDS/CCIL (net delivery system/Clearing Corporation of India Ltd) becomes fully operational, RBI will announce the date to move to stage II wherein non-bank participants would be allowed to lend, on average, in a reporting fortnight up to 75 per cent of their average lending in call market during 2000-01."

To carry the reforms further in the money market, the following steps are proposed:

"Scheduled commercial banks' (SCBs) daily lending in the call/notice money market not to exceed 25 per cent of their net owned funds (NoF) as at the end of March of the previous financial year.

"Scheduled commercial banks daily borrowings in the call/notice money market not to exceed 100 per cent of their net owned funds or 2 per cent of aggregate deposits as at the end of March of the previous financial year, whichever is higher.

"The existing borrowers and lenders are allowed to unwind their positions in excess of the prudential limits by the end of August 2002.

The daily borrowings of State Co-operative Banks (SCBs) and District Central Co-operative Banks (DCCBs) in the call/notice money market not to exceed 2.0 per cent of their aggregate deposits as at the end of March of the previous financial year."

The RBI will consider allowing temporary access to call/notice market to any banks facing mismatches on request.

Increased access over stipulated norms may be permitted by RBI for a longer period for banks with fully functional ALM system satisfactory to RBI.

The RBI has also announced the constitution of a working group with representatives from eligible entities to recommend by June 30, 2002, the criteria for fixing the limits for Primary Dealers (PDs) in call/notice money market and suggest a road map for phasing them out from the call money market.

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