RBI Issues Draft Master Direction for Call, Notice and Term Money Markets 2026: A Complete Regulatory Framework
The Reserve Bank of India has taken a significant step toward strengthening India's unsecured money market ecosystem by releasing its draft Master Direction — Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2026. Released on June 25, 2026, pursuant to the developmental and regulatory policy announcement of April 08, 2026, this draft consolidates multiple earlier circulars into a single, unified framework. Stakeholders, including banks, market participants, and other interested parties, have been invited to submit their feedback by July 17, 2026.
Background and Policy Rationale
Why a New Master Direction?
A well-functioning term money market serves a dual purpose in any financial system. First, it offers an alternative source of short-term funding to market participants. Second, and arguably more important from a macroeconomic standpoint, it strengthens monetary policy transmission by forming a critical bridge between overnight money market rates and longer-tenor interest rates.
The existing regulatory framework governing these markets was spread across several circulars issued at different points in time, creating fragmentation in both understanding and implementation. The draft Master Direction — Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2026, seeks to:
- Consolidate all prior circulars into a single, comprehensive document
- Enhance liquidity in the term money market segment
- Expand the participant base to bring in more entities
- Raise borrowing limits for standalone primary dealers to encourage deeper market engagement
The draft has been framed in exercise of powers conferred under Section 45W of the Reserve Bank of India Act, 1934, read with Section 45U of the same Act, and will, upon final issuance, supersede all directions listed in Annex-I thereof.
Key Definitions Under the Draft Directions
Understanding the Terminology
The draft provides precise definitions that form the interpretive foundation of the entire framework. Some of the most operationally significant definitions are set out below:
Types of Money Market Instruments:
- Call Money refers to borrowing or lending of unsecured funds on an overnight basis.
- Notice Money covers borrowing or lending of unsecured funds for tenors extending up to and inclusive of 14 days, but excluding overnight transactions.
- Term Money encompasses borrowing or lending of unsecured funds for periods exceeding 14 days and going up to one year.
Institutional Definitions:
- "All India Financial Institution (AIFI)" includes five institutions: Export Import Bank of India, National Bank for Agriculture and Rural Development, National Housing Bank, Small Industries Development Bank of India, and National Bank for Financing Infrastructure and Development.
- "Bank" is defined with reference to clause (c) of
Section 5of the Banking Regulation Act, 1949, and encompasses banking companies, regional rural banks, corresponding new banks, the State Bank of India, and cooperative banks. - "Company" carries the meaning assigned under
Section 2(20)of the Companies Act, 2013. - "Non-Banking Financial Company (NBFC)" has the meaning assigned under
Section 45I(f)of the Reserve Bank of India Act, 1934. - "Standalone Primary Dealer" refers to an NBFC holding a letter of authorisation from the Reserve Bank to operate as a Primary Dealer in terms of the Guidelines for Primary Dealer in Government Securities Market dated March 29, 1995.
- "Payments Bank" refers to a bank licensed under
Section 22of the Banking Regulation Act, 1949, governed by the Reserve Bank Guidelines for Licensing of Payments Banks dated November 27, 2014. - "Small Finance Bank" is similarly licensed under
Section 22of the Banking Regulation Act, 1949, and governed by the Reserve Bank Guidelines for Licensing of Small Finance Banks dated November 27, 2014.
Infrastructure Definitions: