RBI Panel Recommends Extending Money Market Hours to 7pm
An RBI working group has proposed extending money market trading hours to 7pm, a move aimed at enhancing liquidity management and providing banks with more access to funds during late hours.
- The recommendation responds to the rise of round-the-clock digital payment systems like UPI, which have reshaped liquidity patterns in India’s financial ecosystem.
- The shift from a 5pm to 7pm closure would give institutions more time to react to market signals and funding needs, especially amid growing global linkages.
Reflecting Market Evolution Since 2019
The panel noted that since the last review in 2019, India’s financial markets have grown in size and complexity, warranting an update in market operations.
- There has been a surge in market participants, including non-resident investors, especially in government securities and derivatives.
- Regulatory reforms and inclusion in global indices have further intensified cross-border capital flows, impacting intraday liquidity cycles.
Trading and Settlement Adjustments Proposed
Specific changes have been recommended across various money market instruments, ensuring alignment with market dynamics and settlement efficiency.
- Call money trading would extend to 7pm, with a reporting cut-off set at 7:30pm, supporting better end-of-day liquidity assessment.
- Market repo and triparty repo (TREP) transactions would now run until 4pm, an hour later than the current window.
Settlement Timings and LAF Auction Revisions
To accommodate later trades, the repo settlement window would also be revised to 5:30–6:30pm, allowing smoother end-of-day clearing.
- The Liquidity Adjustment Facility (LAF) auction, which is critical for managing daily liquidity, would shift to an earlier slot, from 9:30 to 10am.
- The RBI would retain flexibility for fine-tuning operations, ensuring it can intervene as needed to stabilise short-term interest rates.
Need for Synchronised Financial Operations
The recommendations reflect the panel’s view that market timing is central to liquidity, price discovery, and volatility control, especially in a rapidly digitising financial landscape.
- Advancements in trading infrastructure and integration with offshore markets necessitate longer, synchronised trading hours.
- By extending hours, India moves closer to global market practices, supporting better alignment across time zones and capital flows.
