The Reserve Bank of India (RBI) Governor Shaktikanta Das on January 27 said there is a need to ensure liquidity for retail investors in the government securities (G-Sec) market.
“There remains a need for improvement in ensuring liquidity for retail investors in the government securities markets,” Das said.
Das was addressing 22nd FIMMDA-PDAI Annual Conference, Dubai.
It further said that secondary market liquidity in G-Secs is concentrated in a few securities and tenors. The MIBOR-based OIS remains the only major liquid product in the interest rate derivative market.
A term money market remains absent, notwithstanding a host
of facilitative policy measures. "Access of the retail segment to markets, especially derivative markets, needs to improve further," Das added.
During the COVID-19 pandemic, the government bond market remained resilient, with bid-ask spreads being the lowest among peers nations.
"The yield curve has also evolved in an orderly manner without any undue volatility, despite the significantly higher government borrowing," Governor said in a speech.
Further, it said going forward, greater challenges will emerge as the footprints of Indian banks increase in the offshore markets, the range of products expand, non-resident participation in domestic markets grows and as capital account convertibility increases.
"Market participants will have to prepare themselves to manage the changes and the risks associated with globally integrated markets." Das said.
The achievement of desired outcomes is contingent on financial institutions and market participants taking forward the reform agenda so that we have more vibrant and resilient financial markets.