Focus should be on enhancing, widening the participation of Indian players in markets for rupee derivatives: Das

On Monday, The Reserve Bank of India governor Shaktikanta Das called for increased participation and involvement of Indian banks in rupee derivatives market, both domestic and offshore while being prudent.

Delivering the keynote address at a conference of Fixed Indian Money Market And Derivatives Association of India (FIMMDA) in Barcelona, the Governor noted that participation of domestic banks in derivatives markets remains limited with only a small set of active market-makers. Also, participation of Indian banks in global markets is growing but it is quite small.

“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,” Das said at the conference in Barcelona.

Speaking at the conference, Das mentioned that domestic banks primarily interact with market-makers in global markets instead of end clients, and they have not yet established themselves as significant global market-makers.

A market maker is a participant who enhances market liquidity by placing both buy and sell orders. He also emphasized that banks must conduct their own due diligence, evaluate their risk tolerance, and proceed cautiously in this direction.

“Going forward, our focus should be on enhancing and widening the participation of Indian players in markets for Indian rupee derivatives, both domestically and offshore, while being prudent,” the Governor said.

Commenting on the initiatives taken by the RBI to support the financial markets, Das said the recent reforms of the central bank are aimed at providing a strong bedrock for markets to move to the next trajectory to meet the funding requirements in the economy, provide cost-effective hedging options and compete effectively in global markets.

There are, however, some areas which call for attention, he said, while highlighting specific areas where more can be done.

Das said transparency in pricing remains work in progress and more can be done.