On May 3, 2025, a working group established by the Reserve Bank of India (RBI) recommended extending the trading hours for the interbank call money market from the current 5:00 PM to 7:00 PM. This proposal aims to provide banks with greater flexibility in managing liquidity and accessing funds, especially in light of the increasing complexity and 24×7 nature of India’s financial markets. The step also seeks to align Indian markets more closely with global trading hours, particularly those of European and U.S. markets.
In a significant move aimed at modernizing India’s financial markets, the Reserve Bank of India (RBI) has proposed extending the trading hours for the interbank call money market from the current 5:00 PM to 7:00 PM. This recommendation comes from a working group established by the RBI to assess the evolving needs of market participants and to suggest necessary adjustments across different market segments.
Background and Rationale
The interbank call money market is a critical component of India’s financial system, allowing banks to manage short-term liquidity by borrowing and lending funds on an overnight basis. Traditionally, this market has operated until 5:00 PM, aligning with domestic business hours. However, with the advent of 24×7 real-time payment systems and increased integration with global financial markets, there is a growing need for extended trading hours to provide banks with greater flexibility in managing liquidity and accessing funds.
The RBI’s working group noted that the expansion of India’s financial markets, the proliferation of digital payment systems like UPI, and the increased participation of non-resident investors have transformed liquidity patterns and operational requirements. Extending the trading hours is seen as a step towards aligning Indian markets more closely with global counterparts, particularly those in Europe and the United States.
Additional Recommendations
Beyond the extension of the call money market hours, the working group has proposed several other changes:
- Market Repo and Tri-Party Repo (TREPS): Extend trading hours until 4:00 PM, up from the current 2:30 PM and 3:00 PM respectively.
- Settlement Windows: Adjust settlement windows for repo deals to 5:30 PM–6:30 PM to accommodate later trading hours.
- Liquidity Adjustment Facility (LAF): Advance the timing of the pre-announced LAF auction to 9:30 AM–10:00 AM from the current 10:00 AM–10:30 AM slot.
These recommendations aim to enhance the efficiency of liquidity management and reduce the reliance on the RBI’s Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) during post-market hours.
Stakeholder Feedback and Implementation
The RBI has invited feedback on these proposals from stakeholders and the public until May 30, 2025. The final decision on implementing these changes will be made after considering the inputs received.
Implications for the Financial Sector
Extending the trading hours of the interbank call money market is expected to provide banks with greater flexibility in managing their liquidity needs, especially in the context of round-the-clock payment systems. It also aligns with global best practices, potentially enhancing the attractiveness of Indian financial markets to international investors.
However, the proposed changes will require adjustments in operational processes, technology infrastructure, and staffing for market participants. Ensuring adequate liquidity during the extended hours and maintaining the stability of the financial system will be critical considerations during the implementation phase.
