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Informist, Friday, May 1, 2026

 

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--Dealers: RBI Malhotra says India bks need to evolve as mkt makers globally
--CONTEXT: RBI Governor Malhotra spoke Fri at FIMMDA annual meeting 
--Dealers: RBI Malhotra says hit from energy prices may be offset by FTAs 
--Dealers: RBI Malhotra says outflows a cause of concern, seen moderating 
--Dealers: RBI chief says will take apt steps to mitigate global spillovers 
--Dealers:Malhotra listed RBI priorities as deeper mkts, wider participation 
--Dealers: RBI chief says scope to improve liquidity in gilts across tenors 
--Dealers:RBI chief says bks, PDs' access to exclusive liquidity a privilege
--Dealers: RBI Malhotra says banks, PDs must ensure orderly mkt conditions
--Dealers: RBI chief says banks, PDs must help better, fair price discovery 
--Dealers: RBI chief urged development of interest rate, credit derivatives 
--Dealers: RBI chief urged bks to give greater access to retail participants 
--Dealers:RBI chief says connected NDS-OM with global bond trading platforms 
--Dealers: SEBI says mulling tokenisation of bonds
--CONTEXT: SEBI whole-time member Singh speaks at FIMMDA annual meeting 

 

By Aaryan Khanna, Cassandra Carvalho, and J. Navya Sruthi

 

NEW DELHI – Reserve Bank of India Governor Sanjay Malhotra said Indian banks must evolve to move the global rupee market onshore, according to multiple treasury officials attending the speech. The governor was speaking at the 25th annual conference of the Fixed Income Money Market and Derivatives Association of India and Primary Dealers Association of India, being held in Amsterdam over the long weekend. 

 

"Indian banks are dealing with offshore market makers rather than with end users," Malhotra said, according to the officials. "If the global Indian rupee market has to be onshore, Indian banks will need to evolve as market makers globally." As part of regulatory measures to deepen the secondary market, the RBI has also connected Clearing Corp. of India's Negotiating Dealing System – Order Matching platform – the platform for trading government securities – to global bond trading platforms, he said.

 

The comments came as part of the central bank's push for deeper financial markets India with broader participation and efficient price discovery. The governor listed out five measures in total for the development of financial markets, in his address to the financial market bodies. For government bonds, he noted that liquidity was concentrated in only benchmark papers and should also spread to other tenors as well as state government securities.

 

The corporate bond market had vast scope for growth, the governor said. Just as gilt and corporate bond yield curves had developed, the RBI wanted to do the same for state bonds, he said. In April, the central bank – which is the debt manager of the Centre and states – introduced a benchmark issuance strategy for states where they specify what tenures they would borrow in through the quarterly indicative calendars. In Apr-Jun, nine states have opted to take part in the pilot. 

 

Malhotra said over-the-counter derivatives markets, especially interest rate derivatives, were concentrated in only one or two segments. More such derivatives must be made available so that users have efficient interest rate hedging options to tap, he said. Similarly, credit derivatives has not taken off meaningfully and must be a focus area for the market bodies. The RBI chief said market makers must be delegated developmental work in these under-utilised areas.

 

The governor stressed that banks and primary dealerships have additional responsibility due to their access to exclusive liquidity facilities. These sections of the market can participate in the RBI's variable rate repo and reverse repo operations and banks can borrow from and lend money to the RBI through the Marginal Standing Facility and Standing Deposit Facility, respectively.

 

Users of over-the-counter derivatives have to approach market makers to access these products. It is the responsibility of banks and primary dealers to ensure fair and transparent pricing for all, no matter the category of user or the size of the transaction, Malhotra said. The uptake of bond forward contracts by long-term investors including life insurers after their introduction last year has been heartening to see, with more promotion possible, he said. 

 

"While these privileges are part of market power to all of you and which is beneficial for your growth but let me mention that this comes with corresponding responsibilities, which you all understand," the RBI governor said, according to dealers. "The responsibilities to ensure that every user has access to the financial markets... (and) to ensure that broader regulatory objectives are met in letter and spirit."

 

Banks must also do more to directly offer fixed income, foreign exchange, and derivative products directly to retail participants, a key focus area for the regulator, Malhotra said. The central bank had taken several steps to broaden the investor base in the fixed income segment to retail and non-retail participants and market players must do more on their part, he said. The RBI Retail Direct scheme was launched in November 2021, with only 361,402 accounts opened as of latest data. Primary market subscription of government securities was INR 87.36 billion and secondary market trade totalled INR 91.67 billion in total by Apr. 27. 

 

Securities and Exchange Board of India Whole-Time Member Amarjeet Singh also spoke at the conference before the RBI governor. As part of the efforts to deepen the corporate bond market, Singh said that the capital markets regulator was mulling over tokenisation of the bonds, without giving any further details. He also recounted steps taken in the recent past to deepen bond markets and encourage participation of foreign portfolio investors, dealers said. 

 

"Tokenisation was the only new thing that the SEBI member said," one of the treasury officials attending the event said. "It could be a use-case that RBI and SEBI explore through CBDC (central bank digital currency)."

 

EXTERNAL HEADWINDS

RBI Governor Malhotra said the event was being conducted in challenging times, acknowledging the external headwinds from the war in West Asia. Banks and primary dealerships must ensure orderly market conditions at a time when financial markets were volatile and increasingly interconnected, he said.

 

The central bank would continue to assess emerging market needs and meet them, as well as take appropriate steps to mitigate global spillovers. Its new liquidity framework, adopting in September, allowed more agile and nimble management of cash in the financial system, he said. At the same time, ensuring financial resilience was not only a responsibility of the regulators but a shared responsibility among the attendees at the conference as well, the RBI chief said. 

 

India's current growth-inflation dynamics give it a better footing to start a crisis with, Malhotra said, noting that the 4.6% inflation forecast for 2026-27 (Apr-Mar) was well within the RBI's 2-6% tolerance band and GDP growth was seen at a healthy 6.9%. He also said India's current account deficit would continue to be manageable in FY27. India's import bill is expected to balloon as crude oil prices have shot up by more than 60% since the US and Israel attacked Iran on Feb. 28, effectively leading to the crucial Strait of Hormuz being shut for energy exports over the past two months.

 

Some of the headwinds coming from higher energy prices will be offset by the impact of free-trade agreements, Malhotra said, referring to trade deals struck with the US, European Union, and other countries over the past year. He flagged outflows were a concern but expected to moderate in the coming months as India's equity valuations had improved, falling from recent highs. These comments were similar to remarks he made on the external sector at the conclusion of the Monetary Policy Committee's most recent meeting on Apr. 8. 

 

"Repatriations should moderate and the net capital account should be much better than last year," Malhotra said, according to the market participants. 

 

Gross foreign direct investment into India is expected to surpass $90 billion in FY26 and continue to be "very strong", growing in the high-to-mid-teens, Malhotra said. In Apr-Feb, RBI data showed gross FDI was already $88.30 billion, up over 18% over the same period last year.  End

 

US$1 = INR 94.91

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Akul Nishant Akhoury

 

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