AIFIs such as Export Import Bank of (Exim), National Bank for Agriculture and Rural Development (Nabar) National Housing Bank (NHB), Small Industries Development Bank of India (Sidbi) and National Bank for Financing Infrastructure and Development (NaBFID) shall be eligible to participate in the term money market both as borrowers and lenders, the RBI said.
Housing finance companies (HFC) would also be eligible- except base level NBFCs.
HFCs can borrow term money up to 200% of net owned funds as at the end of previous financial year, while the borrowing limit for AIFIs would be dependent on internal board approved limits within limits prescribed by the Department of Regulation at the RBI. The central bank has called for comments from stakeholders on the draft by July 17.
Borrowing limits for standalone primary dealers for term money borrowings of two days to 14 days and inter corporate deposits has also been enhanced to 400% of Net Owned Fund (NOF) as at the end of previous financial year up from 225% earlier. Both these changes were announced as part of the statement on developmental and regulatory policies by the central bank after the monetary policy review in April. The policy changes are being done with a view to further enhance the depth of participation and liquidity in the term money market segment, RBI had said.
“An active-term money market, apart from providing an alternative funding avenue to the market participants, also helps in enhancing monetary policy transmission by creating a link between the overnight money market and longer-term interest rates,” the central bank had said.