Reserve Bank of India on Thursday put out draft rules proposing to expand
participation in India's term money market to shadow banks and corporates to
deepen funding markets and broaden short-term liquidity channels. Under current
rules only banks and independent primary dealers trade in the term money market
under prudential limits. The draft would allow non-bank financial companies,
including mortgage lenders, to act as borrowers and lenders in term money-market
transactions; corporations would be permitted to participate as lenders. Smaller
NBFCs would be excluded. The RBI said the reform was first flagged in April's
monetary policy statement and the draft will be subject to public consultation.
