A Reserve Bank of India (RBI) panel has proposed extending the operating hours of the money market from 5pm to 7pm. This move aims to provide banks with greater flexibility in managing short-term liquidity and accessing interbank and central bank funds. The proposal comes in response to the growing complexity and size of India’s financial markets, which have become increasingly linked to global markets. The panel was established to review trading and settlement hours across RBI-regulated markets, with a focus on improving market efficiency, liquidity, volatility, and price discovery.
Since the last major review in 2019, India’s financial markets have undergone significant changes, including an increase in participants, products, and non-resident activity. The introduction of round-the-clock payment systems, such as UPI, has also altered liquidity dynamics. The panel believes that extending trading hours will help to better align India’s markets with global markets and provide more opportunities for market participants.
The proposed changes include extending call money trading to 7pm, with a reporting window closing at 7:30pm. Market repo and triparty repo (TREP) trades would be permitted until 4pm, an hour later than the current close. The settlement window for repo deals would also be shifted to 5:30-6:30pm. Additionally, the liquidity adjustment facility (LAF) auction would be moved forward to 9:30-10am to align market operations at the start of the day.
The extension of trading hours is expected to have several benefits, including improved liquidity, reduced volatility, and more efficient price discovery. It will also provide banks with greater flexibility in managing their short-term liquidity and accessing interbank and central bank funds. The RBI will continue to fine-tune operations throughout the day, as needed. Overall, the proposed changes aim to enhance the efficiency and effectiveness of India’s financial markets, making them more competitive and attractive to global investors.