RBI mulls comprehensive debt management plan

The Reserve Bank of India (RBI) plans to articulate a comprehensive debt management strategy.

According to the annual report 2013-14, the key ingredients of this will be sound international practice and extending maturities to cater to the requirements of diverse investors.  

The focus shall also be on consolidation of public debt and reducing rollover risk through active switch/buyback operations.  

RBI believes with a Rs 6 lakh crore market-borrowing programme of the government, sovereign debt markets assume a vital role in the conduct of fiscal policies and have spillover effects.

Deeper, wider, more liquid and efficient financial markets provide support to growth.

To make this process more efficient and transparent, RBI plans to undertake reforms in financial markets, set up an over the counter (OTC) derivatives trade repository and take several other steps in support of the debt management strategy, said the report.  

Improving liquidity in the government securities (G-Secs) markets remains a priority. In this context, a review of the guidelines for short sale and repo/reverse repo in G-Secs is planned. Possible ways to revitalise market-making by primary dealers will also be examined, said the report.  

Introduction of an execution facility with central counterparty in the interest rate swap market will be a focus area during 2014-15.  

“Upgradation of the Negotiated Dealing System order-matching platform would be initiated with the objective of having faster throughput, enhanced functionalities, rich user interface and internationally compatible message formats,” said the report. The feasibility of international settlements for Indian sovereign debt securities will also be examined, RBI said.  

For greater transparency and to reduce information asymmetry, a public dissemination system will be instituted at Clearing Corporation of India for disclosing price and volume information relating to major inter-bank OTC foreign exchange derivatives.  

PRIORITY

•RBI plans to articulate a comprehensive debt management strategy

•Sound international practice and extending maturities to cater to the requirements of diverse investors key to its plans

•The focus shall also be on consolidation of public debt and reducing rollover risk through active switch/buyback operations

•Improving liquidity in the government securities (G-secs) market remains a priority