RBI calls for enhanced participation of Indian banks in global markets

The Governor of Reserve Bank Shaktikanta Das has called for enhanced participation of Indian banks in global markets, which will growing, is yet quite small, and expressed concern over participation of domestic banks in derivative markets remaining limited with only a small set of active market makers.

- NIVEDITA MUKHERJEE

Domestic banks are dealing with market-makers in global markets rather than with end clients and are yet to emerge as market-makers of note globally, the RBI Governor said Monday at a global conference in Barcelona.

These are among the six recommendations of the RBI Governor for the further development of India's financial markets, which have seen a slew of reforms undertaken by the RBI and aimed at providing a strong bedrock for markets to move to the next trajectory for meeting the growing funding requirements in the economy, providing cost effective hedging options and competing effectively in global markets.

Providing the backdrop to RBI's market reforms, Das recalled that the onset of the global financial crisis (2008) which altered the way the world looked at financial markets, played out at a time when India's financial markets were just beginning to develop, buoyed by the needs of a growing economy and in the background of the transition to market-determined interest rates and exchange rates, convertibility in the current account and gradual liberalisation of the capital account.

Despite significant institutional and market infrastructure developments like setting up of the Clearing Corporation of India Limited (CCIL) and the operationalisation of RTGS, the NDS-OM platform and a trade repository for derivatives, markets remained in the early throes of development. Bank-intermediated finance was the preferred funding option, diversity in financial products and participants was limited and the approach to foreign participation in domestic markets was guarded. At the same time, the economy's growing aspirations was placing increasing demands on financial markets while successive global crises necessitated prudent risk management.