Reserve Bank of India Governor Sanjay Malhotra reminded market makers that privileges come with responsibilities and said they should ensure that broader regulatory objectives are met in letter and spirit even as organisational interests are pursued.
“Market participants must acknowledge that while a privilege bestows some benefits, it also entails responsibilities,” Malhotra said while citing the example of banks and primary dealers who have exclusive access to RBI’s liquidity facilities.
“They are market-makers in the OTC derivative markets, implying that every entity can only transact with you for hedging,” Malhotra said in a speech at the FIMMDA-PDAI Annual Conference in Amsterdam today.
“Similarly, users must approach them to meet their market needs. These privileges accord immense market power to the PDs and banks, which is beneficial for their growth,” he said.
He said the responsibility of market makers is to ensure that every user has easy access to financial markets, and every user can transact on fair and transparent terms, irrespective of size and sophistication.
Malhotra’s comments come after the Indian currency came under pressure in March, following the West Asia conflict, aggravated by speculative activities, resulting in the currency depreciating over 4 per cent in that month. The RBI had to resort to regulatory measures to cut down speculation by imposing limits on net open positions on onshore rupee derivatives.
He said the responsibilities also include protecting, promoting and sustaining market integrity.
Commenting on the areas of improvement for financial markets, he said the development of credit derivatives is yet to take off in any meaningful way.
“This is largely an underutilised area,” he said.
Credit derivatives, particularly credit default swaps, are considered an important component of a developed corporate debt market, as they allow investors to hedge against the risk of default or adverse credit events by issuers. Activity in the CDS market remains limited, reflecting structural characteristics of India’s corporate bond market, which is dominated by highly rated issuers.
Another area of improvement, according to Malhotra, is the usage of the FX Retail platform, which remains limited. “All banks should facilitate this as a priority, so that retail users get a fair deal.”
He said priorities at the RBI remain clear, as it will continue to deepen financial markets, broaden participation, and further strengthen institutional frameworks.
Commenting on the economy, the Governor said the Indian economy has shown remarkable resilience against a challenging global backdrop.
“Growth impulses in the economy have remained robust. Domestic demand continues to be supported by strong consumption and public investment,” he said.
On the external front, he said India’s foreign exchange reserves remain comfortable, with 11 months of import cover, and the current account deficit is sustainable.
According to the latest data, India’s foreign exchange reserves were at $698.5 billion as of April 24, 2025.
“The current account deficit (CAD) is sustainable; while elevated energy prices will exert upward pressure on the deficit, the recently concluded trade agreements should offset some of the impact.” He also said that on the capital account, gross FDI has been encouraging and will remain robust with the recent spree of greenfield FDI announcements, especially in the finance and tech sectors.
“With recent correction in financial asset valuations, we expect repatriations to moderate, improving the net capital account position going forward,” he added.
