Within prudential limits. RBI monetary policy: Banks allowed to set own limits for borrowing in call and notice money markets

Scheduled Commercial Banks (excluding Small Finance Banks) will be allowed to set their own limits for borrowing in Call and Notice Money Markets, according to RBI.

This will be within the prudential limits for inter-bank liabilities prescribed by the Reserve Bank of India.

Also read: RBI revises FY24 inflation projection slightly lower at 5.1%, keeps GDP growth unchanged at 6.5%

This is with a view to providing greater flexibility for managing the money market borrowings, Governor Shaktikanta Das said during his statement on RBI’s monetary policy decision.

The extant guidelines on the Call, Notice, and Term Money Markets prescribe prudential limits for outstanding borrowing in Call and Notice Money Markets for Scheduled Commercial Banks.

Referring to excess liquidity amounting to Rs 1.50 lakh crore being absorbed via

Karthik Srinivasan, Senior Vice-President, Group Head - Financial Sector Ratings, ICRA, observed that banks are already permitted to set their own limits for borrowing in term money and a similar proposal for call and notice money borrowings will allow more flexibility to banks.

“With the current volatility in liquidity conditions, banks can plan liquidity management better and the LCR (liquidity coverage ratio) requirements will ensure that dependence on call borrowing is under check,” he said.

Achala Jethmalani, Economist, RBL Bank

Achala Jethmalani, Economist, RBL Bank

Rajani Sinha, Chief Economist, CareEdge

Rajani Sinha, Chief Economist, CareEdge

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