Longer call money trading hours likely to address liquidity mismatch

The RBI has proposed extending call money trading hours to 7 PM from 5 PM to better align liquidity with 24x7 payment systems and address mismatches in fund flows

The Reserve Bank of India’s (RBI’s) proposal to extend the trading hours of the call-money market to 7 pm from 5 pm is aimed at having enough liquidity to serve the operational needs of real-time payments systems of banks, according to market participants.

 

The call-money market is a short-term market where financial institutions borrow from one another.

 

There have been instances when banks borrowed heavily from the RBI’s liquidity adjustment facility (LAF) and had to park excess funds with the standing deposit facility (SDF) at a lower rate due to a liquidity mismatch.

 

“We have been asking for extended hours.