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| A host of measures have been announced to enhance the liquidity and infrastructural framework of the money market. |
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| To facilitate deepening of government securities market, the RBI has permitted the sale a government security, already contracted for purchase, provided such purchase contract was either guaranteed by an approved central counterparty such as the Clearing Corporation of India Ltd or the counterparty thereof - RBI. |
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| At present, no sale transaction in a government security is permitted without the seller actually holding the security in its portfolio. |
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| On the other hand, for facilitating the operationalisation of the proposal, the settlement of government securities transactions would be switched over to the DVP III mode where accounts of both government securities and the funds would be settled on net basis. |
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| A review of the working arrangements for shifting to DVP III mode will be done every month to consider modifications and continuance. |
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| In order to further develop the repo market with DVP III as the preferred mode of settlement, the issue relating to roll over of repos has already been taken up by the technical advisory committee set up by the RBI. |
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| Meanwhile, to move further towards a pure inter-bank call/notice money market, the limits for lending by non-bank participants has been pruned to 60 per cent of their average daily lending in call/notice money market during 2000-01 with effect from the fortnight beginning December 27, 2003. |
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| The timetable for further phasing out of non-bank participants will be announced in consultation with market participants, said the policy document. |
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| As an extension of the evolving pure interbank market, with effect from February 7, 2004, the borrowing limit for primary dealers have been capped at 200 per cent of their net owned funds (NOF) as at end-March of preceding financial year on average basis in a reporting fortnight. |
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| As far as reporting of call/notice money market transactions on negotiated dealing system platform, it has been urged that all NDS members should report their deals as soon as the deals are concluded. |
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| The remark has been made to improve transparency and strengthen efficiency of the market through complete dissemination of trade information relating to money, government securities and foreign exchange markets although there has been significant increase in the reporting of deals on NDS platform. |
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| With regards to the operationalisation of Separately Traded Registered Interest and Principal of Securities ( STRIPS) , the RBI is in the process of drawing up the detailed specifications required for the development of software for stripping. |
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| Earlier, various measures relating to deepening and developing the government securities market have already been taken by the RBI including permission to gilt holders to participate in repo market, issuance of guidelines for uniform accounting norms for repo and reverse repo transactions, facility for trading in the anonymous screen-based order-driven system of stock exchanges and introduction of exchange-traded interest rate derivatives on the National stock Exchange. |
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