RBI proposes to enhance money market participation, liquidity

Business To Business, Mumbai, 25^th June, 2026:   The Reserve Bank of India (RBI) on Thursday proposed a series of measures aimed at enhancing liquidity and broadening participation in the term money market segment as part of efforts to strengthen India's financial markets.
In its draft Master Direction – Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2026, the central bank suggested that prudential limits for outstanding lending transactions in the call, notice and term money markets should be determined by market participants themselves, subject to approval by their respective Boards.
The draft framework states that regulated entities must ensure that such prudential limits remain within the exposure norms and regulatory framework prescribed by the RBI's Department of Regulation.
"In case of regulated entities, the prudential limits shall be within the regulatory framework of the exposure norms prescribed by the Department of Regulation of the Reserve Bank for the entity concerned," the draft said.
The proposed directions are intended to provide greater flexibility to market participants while maintaining appropriate risk management standards. By encouraging wider participation and improving liquidity in the term money market, the RBI aims to strengthen the efficiency and resilience of the country's short-term funding markets.
The draft directions have been released for stakeholder feedback before the final framework is notified.