The Indian money market is on its way for a transformation. It is being proposed to phase out all the non-banking entities from the money market, in order to widen the spectrum and ensure financial discipline. With the deregulation of interest rates, the government is firm on its stance of maintaining a softer interest rate regime. There are no constraints on the liquidity in the system and new products like CBLO are being introduced for developing repos market. On one hand while these changes bring down the volatility, on the other hand they may also lead to a decrease in the volumes.

The Call Money Market in India is entering into a new phase and going to be repositioned as `pure interbank market' shortly. Due to new prudential norms announced by RBI in its Monetary and Credit Policy of April 2002 that are already in vogue (Ist stage from 05-10-2002 and 2nd stage from 14-12-2002), most of the players have already reduced their exposures in call money market. Most probably, the norms may be extended to term money also in future. Once the Real-Time Gross Settlement (RTGS) is implemented on full-fledged basis, all non-banking entities will be phased out completely.

The seeds of the new prudential norms were sown way back during Narasimham Committee (II) period. But, unexpected events in recent years truly worked as catalysts for hastening the process of fixing prudential norms for lending and borrowing in call money market, thereby implementing the Committee's recommendations in this regard. Earlier, the implementation was delayed to allow these players to have time to readjust their asset-liability structures and also for developing alternative instruments like repos.

Money Market Developments: A Review, Indian money market, non-banking entities, money market, interest rates, CBLO, Treasury, interest rate regime, financial discipline, repos market, interbank market, prudential norms, Monetary, Credit Policy, Real-Time Gross Settlement (RTGS), Narasimham Committee (II), Committee's recommendations, alternative instruments.