RBI Working Group Recommends Longer Call Money Market Hours to Enhance Liquidity Flexibility

Key Recommendations by RBI Working Group (Chaired by Radha Shyam Ratho):

• Extended Trading Hours for Call Money Market:
  • Proposed trading window to be extended till 7:00 PM (from the current 5:00 PM).
  • Aims to offer greater flexibility for banks in overnight fund management and balance sheet optimization.
• Changes to Market Repo & Tri-Party Repo (TREP):
  • Synchronize and extend trading hours for both market repo and TREP to 4:00 PM.
  • Unify TREP trading hours for participants settling via Designated Settlement Banks and RBI.
• Revised LAF Auction Timings:
  • Prepone the Liquidity Adjustment Facility (LAF) auction to 9:30–10:00 AM, from the current 10:00–10:30 AM.
  • This change is aimed at improving liquidity planning during the trading day.
• Government Securities Market:
  • No change to current onshore trading hours.
  • However, offshore trading with non-residents may be allowed between 5:00 PM and 11:30 PM, subject to:
    • T+1 trade reporting on NDS-OM before onshore hours.
    • T+2 settlement cycle.
• No Changes Proposed For:
  • Interest Rate Derivatives
  • Foreign Exchange Markets

Rationale Behind the Recommendations

• Post-5 PM, many banks face settlement uncertainties, impacting overnight fund usage.
• Greater alignment with global best practices and rising market volumes demand flexible frameworks.
• Feedback from market participants revealed a strong preference for operational flexibility.

Market Trends and Data Highlights (2014–2025)

• Overnight Money Market Annual Turnover:
  • Grew from ₹281.37 trillion (2014–15) to ₹1,324.05 trillion (2024–25).
• Daily Average Turnover:
  • Increased from ₹1.17 trillion to ₹5.52 trillion in the same period.
• TREP Segment Dominance:
  • Accounts for 69% of daily average volume, followed by market repo (29%).
  • Call Money share fell from 13% to 2%.

The RBI’s working group has proposed a pragmatic set of market reforms to reflect the evolving structure of India’s financial ecosystem. These changes aim to improve liquidity management, ensure operational continuity, and enhance market efficiency.

BS