R. Suryamurthy
A Reserve Bank of India (RBI) working group has proposed sweeping changes to trading and settlement timings across India’s financial markets, aiming to deepen liquidity, streamline operations, and align Indian markets more closely with global practices. The recommendations reflect a strategic response to the evolving dynamics of financial markets, increased participant diversity, and technological advancements.
The panel, chaired by Radha Shyam Ratho, submitted its report in April 2025 after a detailed review of current market practices. In a letter dated April 28 to RBI Governor Sanjay Malhotra, the group said the proposed changes would “aid market development, enhance price discovery, and optimize liquidity management.”
Money Market: Enhanced Liquidity and Real-Time Response
Extended Trading Hours: The call money market could remain open until 7:00 PM, while trading in market repo and TREP (Tri-Party Repo) would be unified until 4:00 PM. These changes are expected to offer banks and institutions a broader window to adjust positions, especially in the context of India’s 24×7 payment infrastructure.
Shifted Settlement Timings: Corresponding settlement of repo trades is proposed between 5:30 PM and 6:30 PM, aiming to reduce the lag between trading and settlement and lower associated risks.
Earlier LAF Auctions: Moving the Liquidity Adjustment Facility (LAF) auction window to 9:30 AM–10:00 AM would allow banks to address liquidity requirements earlier in the day, smoothing intra-day operations.
Government Securities Market: Global Alignment and Operational Efficiency
Extended FPI Access: A key proposal allows Foreign Portfolio Investors (FPIs) to engage in post-market hour transactions up to 11:30 PM IST, aligning with U.S. trading hours. These trades would follow a T+1 reporting and T+2 settlement cycle.
Unified Settlement Window: Settlement timings for government securities could be aligned with those of the repo market (5:30 PM to 6:30 PM), streamlining operations for institutions active in both markets.
T+0 DvP1 Settlement for Banks: Banks could also benefit from same-day settlement (T+0) on a Delivery versus Payment basis, reducing intraday credit exposures and improving treasury operations.
Foreign Exchange Market: Gradual Extension with Risk Control
Longer Trading Day (Proposed): While retaining the current 9:00 AM–3:30 PM window, the report suggests allowing banks and mutual funds (AMFI members) to trade up to 5:00 PM, reflecting increased client activity and overlap with Asian markets.
Two-Stage Settlement: Introducing morning and afternoon settlement cycles through CCIL would help manage liquidity more effectively and reduce settlement risks.
The report emphasizes that extending trading hours across multiple market segments could enhance liquidity and support more accurate price discovery. At the same time, it warns of potential volatility during extended hours due to thinner participation, calling for careful calibration and participant preparedness.
Critically, the changes are seen as a step toward greater global integration, particularly the accommodation of FPI activity during U.S. hours — a move likely to attract higher foreign inflows into Indian debt markets.
However, the operational overhaul will demand substantial adjustments. Market participants will need to revamp trading systems, upgrade back-office workflows, and realign liquidity management strategies. Settlement infrastructure, especially payment systems, may also require enhancements to support new timing frameworks.
The RBI is expected to consult stakeholders and assess market readiness before implementing the recommendations. If adopted, the proposed overhaul could mark a transformative shift in how India’s financial markets function, aligning them more closely with global best practices while reinforcing systemic resilience.
The report underscores a fundamental recalibration of India’s market infrastructure — one that balances expanded access with risk management in an increasingly integrated global economy.