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Informist, Monday, Jul. 27, 2026

 

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--RBI Jain: Viksit Bharat financing needs can't be met via bank lending alone 
--RBI Jain: India financial mkts must distribute risk more efficiently 
--RBI Jain: India financial mkts must mobilise long-term capital 
--RBI Jain: Wider range of enterprises must gain access to mkt-based finance 
--RBI Jain: Next challenge is to make markets deeper, broader, resilient 
--RBI Jain: Indian markets must channel savings into productive investment 
--RBI Jain: Fincl markets must command confidence even when tested 
 

 

NEW DELHI – The next challenge for India's financial markets is not merely to become large, but to become deeper, broader and more resilient so they can support the country's ambition of becoming a developed economy by 2047, Reserve Bank of India Deputy Governor Rohit Jain said on Friday. Financing requirements for a Viksit Bharat cannot be met through bank lending alone, and will require much stronger market-based financing to mobilise long-term capital and distribute risks more efficiently, Jain said at the Financial Institutions Leadership Conference organised by Standard Chartered Bank.

 

"India has traditionally relied on a bank-led financing model. That model has served the economy well. However, the scale, tenor and diversity of financing required for Viksit Bharat cannot be met through bank balance sheets alone," Jain said. "It will require a stronger complement of market-based finance, government and corporate bond markets for long-duration capital, and deeper foreign exchange and derivative markets for pricing and distributing risk," the deputy governor said in his first public speech after assuming office on May 4. He heads 10 departments, including the financial markets regulation department and the foreign exchange department.

 

According to Jain, market size reflects the volume of activity, but market depth tells how effectively the market performs. The overnight money market is active and transmits changes in the policy rate efficiently, but beyond the overnight segment, term activity remains modest. "A deeper term money market would strengthen benchmark formation, improve the pricing of financial instruments and support more effective management of interest-rate risk," he said. 

 

The corporate bond market presents another dimension of the same challenge, he said. Primary issuance has grown, particularly among highly rated issuers, and the next stage must involve greater secondary-market liquidity and better differentiation and pricing of credit risk, Jain said. "Secondary-market liquidity gives investors greater confidence that they can adjust their exposures when required," he said. "Put simply, issuance creates financial assets; liquidity helps create a market around them."

 

To be sure, Indian regulators, including Finance Minister Nirmala Sitharaman herself, have spoken about the need to deepen the corporate bond market, despite the scale at which it has grown. India's corporate bond market has expanded at a 12% annual rate over the past decade, with outstanding issuances rising to INR 53.6 trillion in 2024-25 (Apr-Mar) from INR 17.5 trillion in FY15. The country saw the highest-ever fresh issuances of INR 9.9 trillion in FY25.

 

It has also been a long-standing problem in India that access to financing via the debt market has been skewed toward highly rated borrowers, AAA- or AA-rated, which account for 85-90% of bond issuances. According to the deputy governor, a wider range of enterprises must also progressively gain access to market-based finance. This cannot be achieved merely by introducing new instruments or encouraging investors to assume more risk, he said. It requires investors with the capacity to differentiate and price credit risk, reliable recovery mechanisms, and markets through which such risk can be managed and redistributed.

 

This is where deep markets play a crucial role. They allow interest-rate, currency, and credit risks to be separated from the underlying financing and transferred to participants that are willing and able to bear them. India's interest-rate and foreign exchange derivative markets have expanded, but activity remains concentrated in a limited range of products and tenors. Jain said while new products must be introduced to expand the scope of the market, they must respond to genuine economic needs and enable businesses, investors and intermediaries to manage identifiable risks more effectively.

 

According to Jain, investment and activity in India's government securities market have progressively widened, and the inclusion of Indian government securities in global bond indices has marked an important step in the integration of domestic markets with global capital. This reflects the strength of India's market infrastructure, but the country will require long-term capital for infrastructure, manufacturing, urban development, technology and the expansion of Indian enterprises, both domestically and internationally. "The scale and tenor of these requirements make it important to broaden the channels through which savings are converted into investment," he said. 

 

That said, the resilience of a market is ultimately tested when conditions become difficult, the deputy governor said. "A deep market is not one in which prices never move sharply, or participants never incur losses. It is one in which credible prices continue to emerge, transactions remain possible, and risks can be transferred without disorderly disruption."

 

Calling for greater participation in India's debt market, Jain said liquidity cannot be created through regulation, nor can meaningful participation be mandated. Market institutions must invest in the capabilities required to quote prices, assess risks, manage inventories, and remain active across market conditions, he said. "Above all, they (financial markets) must command confidence — not only when conditions are favourable, but also when markets are tested."   End

 

Reported by Priyasmita Dutta

Edited by Saji George Titus

 

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