New Delhi, Apr 9 (KNN) Reserve Bank of India (RBI) Governor Shaktikanta Das emphasised the need for increased participation by Indian banks in rupee derivatives trading, both domestically and in offshore markets, while stressing the importance of prudent risk management practices, on Monday.

In a keynote address at the FIMMDA-PDAI Annual Conference in Barcelona, Das noted that presently, only a small number of domestic banks are active market makers in derivatives.

Indian banks' participation in global rupee markets is growing but remains relatively limited, with most acting as clients of foreign market makers rather than market makers themselves.

"Going forward, our focus should be on enhancing and widening the participation of Indian players in markets for INR derivatives, both domestically and offshore, while being prudent," Das stated.

He advised banks to carefully assess their risk appetites before expanding derivatives activities.

The Governor highlighted several areas requiring further progress, including improved pricing transparency, narrowing the divergence in pricing between large and small customers, and enhanced vigilance against misuse of banking channels for unauthorised forex trading.

Das framed the RBI's recent financial market reforms as laying the groundwork for Indian markets to better meet funding needs, provide cost-effective hedging, and enhance competitiveness in global markets. He affirmed the central bank's openness to introducing new products and infrastructure based on evolving market conditions.

With the RBI marking its 90th anniversary on April 1, 2024, Das reflected on the institution's role in developing Indian financial markets, emphasising innovation through principle-based regulation, widening market participation, and enabling offshore market access.

(KNN Bureau)