RBI's draft master directions allow AIFIs (Exim Bank, NABARD, NHB, SIDBI, NaBFID) and housing finance companies (excluding base-level NBFCs) to participate in the term money market as both borrowers and lenders. HFCs can borrow up to 200% of net owned funds. Standalone primary dealers' term money borrowing limit is raised from 225% to 400% of NOF. Announced post April 2025 MPC review; stakeholder comments invited by July 17, 2025.

The term money market covers borrowings with maturities ranging from two days to one year — sitting between the overnight call money market and longer-term debt instruments. Until this draft directive, AIFIs and HFCs were not formally permitted participants in this segment, limiting both their funding options and the market's depth.

RBI's rationale is two-fold. First, broadening participation creates alternative funding avenues beyond bank credit for systemically important institutions like NABARD and NaBFID that need medium-term liquidity. Second — and more important for monetary policy — an active term money market creates a yield continuum: it bridges overnight rates (like WACR) and longer-term interest rates, thereby strengthening monetary policy transmission. When the repo rate changes, the signal needs to travel across the yield curve; a thin term money market creates a break in this chain.

The hike in standalone primary dealers' (SPDs) limit from 225% to 400% of NOF for 2–14 day borrowings similarly boosts market-making capacity. SPDs are critical to government securities market liquidity, and higher borrowing limits allow them to take larger positions.

Both changes were announced in RBI's April 2025 developmental and regulatory policy statement alongside the rate cut, signalling RBI's simultaneous focus on monetary easing and market deepening — a dual-track approach that RBI Grade B candidates must link to financial market development strategy.