Mumbai: RBI has proposed sweeping changes to deepen debt markets, allowing corporate bodies to lend in the term money segment – long dominated by banks and primary dealers – while widening their access to govt securities market. It has also introduced total return swaps in credit derivatives, which transfer a bond’s entire return to the buyer, unlike default swaps that only insure against default.The draft norms released on Thursday mark a shift away from the tightly controlled framework of 2021, under which call, notice and term money markets were largely the preserve of banks and primary dealers operating under a uniform set of rules. The new approach fragments this structure, selectively widening access to the term segment-defined as unsecured borrowing beyond 14 days and up to one year-while retaining tighter controls over overnight markets. RBI has hiked primary dealers’ borrowing cap to 400% of net owned funds, from 225%, clubbing term money and inter-corporate deposits. It has also stretched trading hours to match global clocks and extended call, notice and term market windows to 7pm from 5pm. Banks/AIFIs/NBFCs can lend to non-banks under standard loan normsIn a first RBI has proposed the entry of non-bank financial actors into the term money market. All India financial institutions and non-banking financial companies will now be permitted to both borrow and lend in this segment.
