RBI Draft Rules Allow NBFCs, AIFIs and HFCs to Join Term Money Market

The Reserve Bank of India (RBI) issues draft rules allowing Non-Banking Financial Companies (NBFCs), All-India Financial Institutions (AIFIs), and Housing Finance Companies (HFCs) to participate in the term money market. The draft specifies participation eligibility, reporting requirements on the NDS-CALL platform, permissible trading modes, and borrowing limits.

RBI Draft Rules for Participation in Term Money Market:

Dimension	Key Details
Term money definition	Term money comprises unsecured loans and borrowings for periods longer than 14 days, up to 1 year.
Eligible entities and scope	NBFCs and HFCs (except base layer NBFCs) can borrow and lend in the term money market; AIFIs may borrow and lend; companies are allowed to lend only.
Base Layer NBFCs (NBFC-BL)	Base Layer NBFCs are non-systemically important, smaller financial entities that pose minimal risk to the broader financial system.
Reporting requirement on NDS-CALL	RBI provides that all call, notice, and term money deals conducted outside the NDS-CALL platform must be reported there within 15 minutes.
Membership timeline for non-members	Entities not yet on the NDS-CALL platform have 6 months to become members.
Permitted trading modes	The draft authorises trades via over-the-counter markets, including NDS-CALL and RBI-approved electronic trading platforms.
NDS-CALL platform	The Negotiated Dealing System - Call (NDS-CALL) is an electronic, screen-based platform introduced by RBI and developed by Clearcorp, and it enables market participants to negotiate bilaterally, borrow, and lend funds in the Call, Notice, and Term Money markets.
Borrowing limit for NBFCs and HFCs in term money	NBFCs and HFCs (excluding base layer) can borrow up to 200% of their net owned funds in the term money market.
Borrowing limits for standalone primary dealers	Standalone primary dealers can borrow up to 225% of their net owned funds in call and notice money, and up to 400% in term money and inter-corporate deposits combined.
Payments banks participation	Payments banks can borrow and lend in call and notice money markets, and are also allowed to borrow in the term money market.
NBFC legal basis	NBFCs are registered under the Companies Act, 1956.
NBFC role	NBFCs are engaged in the business of loans and advances, and the acquisition of shares, stocks, bonds, debentures, and securities issued by the Government or local authority.
NBFC deposit and account limitations	NBFCs are not allowed to take traditional demand deposits from the public, can accept only time deposits, do not provide savings or current account facilities, and cannot accept deposits for a period less than 12 months and more than 60 months.
NBFC banking and payment system status	NBFCs do not have a banking license, do not form part of the payment and settlement system, and cannot issue cheques drawn on itself.
Deposit insurance for NBFC depositors	Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in the case of banks.
NBFC regulation by RBI	The RBI authorises issuance of licenses to NBFCs, regulates their operations, and ensures adherence to established norms and regulations.
HFC legal basis	Housing finance companies are corporate entities incorporated under Companies Act, 1956.
HFC regulation	Housing finance companies are regulated by the RBI.
HFC types	Housing finance companies comprise deposit-taking HFCs and non-deposit taking HFCs.
Number of HFCs	There are 97 HFCs in the country.
AIFIs setup and role	AIFIs are apex-level, specialized development banks set up by the Government of India, and they address long-term, sector-specific credit gaps, such as agriculture, infrastructure, and housing.
AIFIs regulation and supervision	AIFIs are regulated and supervised directly by the Reserve Bank of India (RBI).
Recognized AIFIs in India	Currently, there are 5 recognized AIFIs in India: NABARD, SIDBI, NHB, EXIM Bank, and NaBFID.