In the context of the Fiscal Responsibility and Budget Management Act, the Annual Policy Statement for the year 2005-06 had indicated reorientation of government debt management operations while simultaneously strengthening monetary operations within the Reserve Bank with a view to moving towards functional separation between debt management and monetary operations.

Accordingly, the Reserve Bank has constituted a new Financial Markets Department (FMD). The functions of FMD would include:

(i) monetary operations such as open market operations (OMO), liquidity adjustment facility (LAF), standing liquidity facilities and market stabilisation scheme (MSS)

(ii) regulation and development of money market instruments such as call/notice/term money, market repo, collateralised borrowing and lending obligation (CBLO), commercial paper (CP) and certificates of deposit (CDs)

(iii) monitoring of money, Government securities and forex markets. In due course, the functions of the Department would also cover RBI's operations in the domestic foreign exchange market to achieve the desired integration in RBI's conduct of monetary operations.

This is probably for the first time that the RBI has constituted a separate department for tracking financial markets. The FMD will be under Dr Rakesh Mohan, who took over as Deputy Governor of the RBI on July 2, 2005 for five years.

..... Read about RBI's Technical Advisory Committee on Monetary Policy