Secondary market liquidity, despite growing over the years, has not been able to keep pace with the expansion of the market, Dimple Bhandia, chief general manager (financial markets regulation department) at the Reserve Bank of India, said on Tuesday.
Bhandia said the annual turnover has increased from Rs 100 lakh crore a decade back to Rs 165 lakh crore last fiscal, and that banks are the dominate players in the secondary market trading.
“Liquidity also remains concentrated in a few securities, thinning out for longer maturities. Liquidity in state government securities also remains limited,” she said at the Morningstar Investment Conference. She spoke about the growth in the money markets, government securities, foreign exchange market and the risk markets for interest, credit and foreign exchange derivatives.
“There are specific features of these markets which pose challenges for efficient price discovery, liquidity management and benchmark management. These are areas which require further policy attention. More importantly, all stakeholders need to align their minds and expand their efforts to together make the markets more robust and vibrant.”
On the forex retail platform, which was linked with Bharat Connect bill payment system, receiving a lukewarm response, Bhandia said, “We will plan to expand this scope to other kinds of participants and products”.