MUMBAI: A New Era for India's Financial Markets

With the advent of UPI and other digital payment systems ensuring round-the-clock transactions, an RBI panel has put forward a groundbreaking proposal to extend money market hours to 7pm from the current 5pm. This move aims to provide banks with increased flexibility in managing short-term liquidity and accessing interbank and central bank funds.

Why Extend Trading Hours?

The recommendations stem from a working group tasked with reviewing trading and settlement hours across RBI-regulated markets. The panel highlighted that trading hours significantly impact market efficiency, affecting liquidity, volatility, and price discovery. Since the last review in 2019, India's financial markets have seen exponential growth in size and complexity, with more participants, a wider range of products, and increased non-resident activity, especially in government securities and derivatives.

Proposed Changes and Their Implications

The panel suggests extending call money trading to 7pm, with the reporting window closing at 7:30pm. Additionally, it recommends that market repo and triparty repo (TREP) trades continue until 4pm, an hour later than the current deadline. To accommodate these changes, the settlement window for repo deals would shift to 5:30-6:30pm. Furthermore, to streamline market operations at the start of the day, the panel proposes moving the liquidity adjustment facility (LAF) auction to 9.30-10am, with fine-tuning operations remaining at the central bank's discretion throughout the day.