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Click here to return to main page of Annual Policy Statement 2006-07
Part II. Annual Statement on Developmental and Regulatory Policies for the Year 2006-07
Financial Markets
114. Significant changes in the institutional framework for financial markets have come about in consonance with the Reserve Bank’s efforts to develop various segments of the financial market spectrum in terms of instruments, processes and micro-structure. Simultaneously, the orderly functioning and soundness of financial market segments has been pursued through regulatory initiatives. Within the Reserve Bank, a clearer assignment of functional responsibilities has been sought to improve operational effectiveness by minimising overlaps and conflict of interest. A Financial Markets Department (FMD) has been set up in July 2005 to fully integrate market operations and improve efficiency in the Reserve Bank’s operations in money, government securities and foreign exchange markets.
115. The implementation of FRBM Act has necessitated a review of the Reserve Bank’s market operations, including introduction of new instruments and refining existing instruments in the context of the evolving scenario. It is in this context that an Informal Group to examine Financial Market Operations by the Reserve Bank has been constituted to evaluate current practices in regard to liquidity operations and refinements in the operating procedure in accordance with evolving circumstances. The report of the Group is under consideration of the Reserve Bank.
Money Market
116. A number of measures were undertaken in recent years with a view to preserving the integrity of money market. Further measures in this direction are given below:
(a) NDS-CALL
117. In pursuance of an announcement made in the Annual Policy Statement of April 2005, a screen-based negotiated quote-driven system for dealings in call/notice and term money market (NDS-CALL) has been developed by the Clearing Corporation of India Ltd. (CCIL) and would be launched shortly with participation by market constituents on a voluntary basis.
(b) Money Market Overnight Rates
118. At present, the Reserve Bank provides information pertaining to money market operations covering volumes, weighted average rates and range of rates for call/notice money market transactions on a daily basis on its website. In order to enable market participants to assess the liquidity conditions in an efficient and transparent manner, it is proposed:
• to provide information on overnight rates and volumes for CBLO and market repo in addition to call money market on the Reserve Bank’s website.
Government Securities Market Read full text
Foreign Exchange Market Read full text
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