RBI Proposes Expanding Money Market Access for NBFCs

The Reserve Bank of India (RBI) released draft proposals on June 25, 2026, aimed at broadening participation in the nation's money market. The central bank intends to allow Non-Banking Financial Companies (NBFCs), specifically mortgage providers, to operate as both borrowers and lenders in the term money markets. This initiative is designed to increase liquidity and efficiency within the shadow banking sector.

Under the proposed framework, larger NBFCs will gain significant operational flexibility. However, the RBI has explicitly excluded smaller non-bank finance firms from this expanded participation to mitigate systemic risk. For those eligible, the central bank has set prudential limits, capping participation at 200% of their net-owned funds as of the end of the previous fiscal year. Stakeholders have until July 17, 2026, to submit feedback on these draft rules.

This move follows the RBI's issuance of Master Directions for Credit Derivatives, a policy shift announced in the Union Budget for FY 2026-27. These directions are intended to facilitate the introduction of derivatives on credit indices and total return swaps on corporate bonds. By integrating NBFCs more deeply into the money market and enhancing derivative instruments, the RBI aims to create a more robust and diversified financial ecosystem, reducing reliance on traditional banking channels for short-term funding needs.