One important concern is the loss of onshore market of the rupee... the volume of trading of rupee in the NDF (non-deliverable forwards) market is said to be a multiple of the volumes in the official domestic exchanges, he said at the anniversary celebrations of the National Stock Exchange in Mumbai.
At the government, we dont have a solution to this (bring back the market volume). The solution has to come from the market participants, Chidambaram said.
He also mentioned that likely challenges with a launch of rupee derivative on global exchanges should also be taken into account. We have to accelerate financial sector reforms to address these concerns, Chidambaram said, adding the government has been making concerted efforts to push a number of reforms.
Referring to the recommendations of the Financial Sector Legislative Reforms Council (FSLRC), Chidambaram said as passing legislation on the suggestions will take time, it has been decided to implement the non-legislative ones first.
One of the recommendations made by the FSLRC seeks to limit the role of the Reserve Bank of India (RBI) in monetary management. The RBI has too many functions, many more functions than other central banks in the world. FSLRC says some functions can be better done by the government and some functions should be entrusted to new bodies and new authorities. It is a well-argued and well-reasoned report. Many of the recommendations of the FSLRC can be implemented, the finance minister said.
Blaming the cozy relationship between corporates and bankers for the under-developed corporate bond market in the country, he said, I think the corporate bond market is not developing because corporates think that banks are ready to lend them money and the banks indeed are ready to give them money.
Blaming tardy state-run banks for high level of non-performing assets, he said banks boards and not the government should be held responsible for the situation. If the bank boards cannot perform their duty, blame should stop with the bank boards and not with the government, he said.
Earlier speaking at the event, Securities and Exchange Board of India chairman UK Sinha said insider trading issues and corporate governance are major focus areas before the market regulator.