The asymmetry between call exchange rates, market repurchase rates and TREP rates is also a major issue and banks must take a positive attitude, the governor said at the 24th FIMMDA-PDAI annual meeting in Bali on Friday.
“The occasional asymmetry requires banks to play a more active role – the only entities that have visited the RBI’s liquidity facilities, calling money markets and repurchase markets to ensure that the liquidity indicators of RBI spread rapidly and seamlessly to the wider markets,” Malhotra said.
He also highlighted the need to develop short-term, risk-free maturity structures, especially during a three-day to three-month period, which would be the benchmark for pricing including interest rate products, including loans.
Additionally, the governor’s comments on the swap market are based on overnight rates, saying that it may not be suitable for hedging exposure. Especially because the segment is also used to express opinions on the expected monetary policy movement.
Most developed countries have at least two main benchmarks – a future movement for taking into account policy rates, while the actual sector uses to hedge risks. Governor Malhotra said in the financial market that all segments, including forex, government securities and money markets, have remained largely stable. Even though the rupee faced some pressure earlier, it has since recovered, and the government securities market is still strong through fiscal 25, despite the stock market witnessing corrections due to capital outflows.
