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-Rajeev Kumar (Editor-in-chief)

Monday, November 30, 2020

Yes, What the Doctor Ordered, Gov Das (The Economic Times)

RBI governor Shaktikanta Das spoke last week on the need for accelerating financial market reforms. It is imperative to do so, to bring about better allocation of resources, mitigate financial risks, and boost transparency across the board. And the way forward is to policy-induce a vibrant corporate bond market, and also put in place a thriving fintech ecosystem. Fintech should be seen as an integral part of financial reform, not just to broaden access but also to improve the quality of mediation. As the governor noted, domestic financial market reforms have traversed a long distance since the pathbreaking 1990s.


The market for government securities has become broad-based, deep and liquid. Yet, while corporate bond issuance has significantly increased in recent years, the vast bulk of it remains privately placed and simply held to maturity. Hence the pressing need for an active and liquid corporate bond market, to shore up transparency in the allocation of funds for big-ticket, long-gestation projects, and also for routine market oversight of the assets. In tandem, what’s required is to complete the markets for better management of currency, interest rate and credit risks.


Banks can now deal in the offshore rupee derivatives market. Norms for foreign portfolio investors have been eased. But financial reforms remain wanting. For instance, while the interest rate derivative market has grown, it remains confined to one product, the Overnight Index Swap, and to a small set of participants.


The recent passing of the Bilateral Netting of Financial Contracts Act, 2020 should rationalise capital exposure for derivative contracts. It could boost the market for Credit Default Swaps, and provide insurance for corporate bonds.

Courtesy - The Economic Times.

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Help Sampadkiya Team in maintaining this website

इस वेबसाइट को जारी रखने में यथायोग्य मदद करें -

-Rajeev Kumar (Editor-in-chief, Sampadkiya.com)

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