NBFCs strengthen treasury teams after RBI opens term money market

NBFCs are hiring treasury specialists in money market operations and liquidity management as the RBI's proposal to widen access to the term money market reshapes funding strategies

Non-banking financial companies (NBFCs) are strengthening their treasury teams after the Reserve Bank of India (RBI) proposed allowing them to participate in the term money market, with several such lenders hiring specialists in money market operations, liquidity management and short-term borrowing, industry executives said.

 

"Earlier, our treasury largely focused on bank borrowings, market debentures and securitisation. Now we need people who understand money market dealing, pricing and counterparty limits. We have already started adding that expertise.

 

"Once you get access to the term money market, treasury decisions become much more dynamic. You need dealers who can read liquidity conditions and execute efficiently through the day," the treasury head of a large NBFC said.

 

The RBI recently came out with draft guidelines proposing to permit eligible NBFCs to participate in the uncollateralised term money market, widening access beyond banks and standalone primary dealers. Under the draft directions on call, notice and term money markets, eligible NBFCs, housing finance companies, all-India financial institutions and companies will be allowed to participate in the term money market, subject to prudential exposure limits.

 

Industry executives said treasury teams are being expanded to manage borrowing strategies, pricing, counterparty relationships and regulatory compliance under the new framework.

 

"The opportunity is not just about accessing another funding source. It is also about building treasury capabilities that can actively manage liquidity and respond quickly to changing market conditions. We expect treasury functions at larger NBFCs to become more sophisticated over time," the chief financial officer (CFO) of a leading NBFC said.

 

Executives said the term money market would provide an additional avenue for raising short-term funds alongside bank borrowings, market debentures and securitisation. They said larger NBFCs, which already have established treasury operations and market relationships, are preparing to participate in the market, while others are building the internal expertise required to operate in the segment.

 

This move by the RBI could also lift market volumes by 40-60 per cent in the first year and potentially double turnover over the next two to three years. The term money market refers to borrowing or lending funds for more than 14 days. Greater participation is also expected to modestly compress funding spreads, with AAA-rated NBFCs likely to borrow 5-10 basis points (bps) below comparable three-month commercial paper (CP) rates as banks deploy surplus liquidity through bilateral unsecured lending.