Although the Indian economy and financial markets have demonstrated a remarkable resilience, they are not immune to the whims of an uncertain and volatile global environment, according to the governor of RBI Sanjay Malhotra. He pointed out that GDP growth is well below what India aspires.
“As I mentioned in my statement of the recent monetary policy announcement (April 9), our internal growth balance has improved significantly.
“There has been a decisive improvement in the main inflation that is projected to remain aligned with the objective or 4 percent in fiscal year 200.
The governor emphasized that he even thought that RBI has projected real GDP growth of FY26 something lower for 6.5 percent, India remains the fastest growing economy.
“However, (GDP growth) is well below what we aspire. We have reduced repo rates twice and provide sufficient liquidity. In view of the feeling in rapid evolution, especially in the global front, we are monitoring and continuous evaluation. Actions in the front of politics, as always,” he said.
A World Bank report in February 2025 indicated that India must grow by 7.8 percent on average in the next 22 years to achieve its aspirations to achieve high income in 2047.
Problems and Conerns: G-SEC Market
The governor said that the Government Securities Market (G-SEC) is perceived as one of the most liquid markets worldwide, as evidenced by the Differential Bid-AK and low impact costs.
However, the billing index (measured as the annual billing to the pending actions) or the date on which the government’s values have remained modest in almost one (1). If less liquid state government values (SGSS) are included, the relationship falls below one (1).
Malhotra observed that liquidity continues to concentrate on some values, thinning for longer maturities. In addition, the secondary trade in the market is dominated by primary banks and dealers, with many large institutional investors that remote “purchase and retention” investors.
Of the more than 3,000 institutional investors in G-SEC, the main ten particles contributed a third of the 2024 general billing duration.
The governor emphasized that a continuous effort of the reserve has been to increase retail participation in the G-SEC market, with the launch of the installation of ‘RBI Retail Direct’ in November 2021 which is an initiative in this direction.
A mobile application for Retail Direct was a recent introduction. RBI also recently allowed retail customers or non-bank stock runners registered in Sebi access to NDS-AM.
“All this makes it imperative to ensure that there is sufficient liquidity of the secondary market available so that these investors participate in the market at reasonable prices.
“Liquuidity and prices must also improve for participants as cooperative banks, pension funds and forecasts with smaller agreements sizes. Banks and primary distributors may need to play a much more active role for this purpose,” he said.
Forex Market
Malhotra said that the fair treatment of customs and transparency in Forex prices for narrower and less sophisticated continuous customs to attract our attention. Much more can be done and should be done here.
“The divergence in prices in FX markets for small and large customers is much broader than what can be justified by operational considerations. FX-back, a transparent platform to make FX transactions, has witnessed said.
The governor stressed that there are regulations to guarantee transparency in the prices of retail customers, including the mandate to unucked the average market or interbank rate for customers. As an industry, market manufacturers need to introspection and evaluate how they can an effective delivery in these regulatory and fiduciary mandates.
Recently, RBI’s announcement that access to FX Retail will also be provided through the Bharat Connect platform, he said that in the first phase, a pilot is planned to facilitate individual purchases of US dollars. Subsequently, its scope will be expanded depending on the experience acquired.
Malhotra appealed to all participants in the financial market, including authorized distributors, to extend their full cooperation to ensure that the pilot is implemented without problems and successful.
The governor noted that RBI continues to see that bank channels are for activities on unauthorized FX trade platforms. He stressed that this requires greater surveillance and stronger efforts of banks to raise awareness among their clients about the dangers of using such platforms.
Monetary markets
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“Thought alternatives are being used, such as indexed exchange rates during the night in treasure invoices, there is still the need for the development of a risk -free term structure to act as a reference point for the price of the interest rate, even.”
The governor stressed that liquefy decreasing in the call money market, whose rate is the operational objective for monetary policy, also requires attention. This market is also essential for the robustness of the Mibor (Mumbai Inter Bank rate offered), the reference point for the market of interest rates.
In addition or the group are the asymmetries that occasionally arise between different monetary market rates, the rate at which RBI provides liquidity, the call money rate, the market repository rate and the TREPS (Treasury Invoices Report Agreement) Rate.
Malhotra said that this requires more proactive operation by banks, entities with exclusive access to RBI’s liquuidity facilities, the call market and repository markets, to guarantee RBI’s liquuidity to the widest.
Posted on April 19, 2025