India’s central bank has proposed broader participation in the country’s money market to include shadow lenders, companies and other financial institutions, in a move aimed at deepening funding markets and expanding access to short-term liquidity.
Currently, banks and standalone primary dealers can only participate in India’s term money market, with certain prudential limits. In draft proposals issued on Thursday evening, the Reserve Bank of India said non-banking financial companies, including mortgage providers would be allowed to trade in the term money markets as borrowers and lenders.
The central bank had first outlined the proposal in its April policy statement and comments on the draft proposal are invited by July 17, 2026, the RBI said.
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Under the draft proposals, companies will also be allowed to participate in the term money market as lenders but smaller non-bank finance firms will be excluded, the central bank said.
The RBI has been calling for greater participation in the unsecured overnight call money market – a key monetary policy target – over the past year. At present, India’s money markets are dominated by secured participants — like banks and primary dealers — who account for the bulk of trading with daily turnover topping around $70 billion.
For shadow lenders, prudential limits for participation in these markets are proposed at 200% of net-owned funds as at the end of the previous fiscal year, the RBI said. For financial institutions, the limits are proposed to be in line with those prescribed by the central bank’s department of regulation.
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