##o facility in october 2013 to provide market participants with additional access to primary liquidity as well as impart greater flexibility in managing their reserve requirements. the reduced reliance on overnight funds by the banks would hopefully encourage them to actively transact in the term money market, paving the way for development of a liquid term money market. the term repo is now available up to 28 day tenor. keeping in view the overall liquidity conditions in the banking system, going forward, reserve bank may appropriately extend the tenor and nature of term repos. iv. iii cp cd markets 26. reserve bank of india has introduced dvp - i based settlement of all otc transactions in certificates of deposit ( cds ) and commercial papers ( cps ) on the lines of the arrangement already existing in case of settlement of otc trades in corporate bonds to eliminate the settlement risk. guidelines on cps have been comprehensively reviewed. changes introduced includes changing minimum rating requirement for cp issuance to a3, allowing buy - back of cp through the secondary market and at prevailing market price, etc. with regard to cds, i would like to mention a rather disturbing phenomenon, which i would term as “ march rush ”. it has been observed for some time that banks raise deposits at exorbitant cost to inflate balance sheets. while this may spruce up appearance of bank ’ s financials, it would have a deleterious impact on money market rates, creating avoidable stress. i suggest that fimmda may engage with banks and take steps to avoid such stress. iv. iv repo in corporate debt 27. to widen the participant base in corporate bond repo market, scheduled urban cooperative banks have been permitted to participate in the instrument. to encourage activity in corporate bond repo, eligible category of collateral has been expanded to include short term instruments like cps, cds and ncds and minimum haircut requirement has been further reduced. there is, however, no activity in the corporate bond repo markets. progress in signing global market repo agreement ( gmra ) is slow. i request fimmda to advise its members to sign gmra to enable trading in corporate bond repo. in case the progress continues to be slow, reserve bank would examine the option of mandating signing of gmra as a market development measure. bis central bankers ’ speeches v. emerging issues 28. i would like to share my thoughts on some of the emerging issues that require deeper deliberations as this is

banking system in united kingdom ). the global scale of crisis and the complex financial system with entities straddling across national jurisdictions necessitated coordinated regulatory action through international agencies, and the g20 has therefore taken an enhanced role in shaping international financial regulatory arrangements. i. ii global initiatives on regulation 7. the new regulatory initiatives are intended to be both more intrusive in their impact on the financial sector than the “ light touch ” approach to regulation and supervision that prevailed – particularly in some jurisdictions – before the crisis, and they are also designed to be much broader in scope. they cover not only capital and liquidity required by financial institutions ( e. g. basel iii ), but also market activities, financial instruments, infrastructure, and benchmarks [ e. g. markets in financial instruments directive ( mifid - ii ), markets in financial instruments regulation ( mifir ), european market infrastructure regulation ( emir ), european commission ’ s proposed regulation on indices used as benchmarks in financial instruments and financial contracts ]. the cost to the industry for complying with these new regulations is certain to be high, but it is outweighed by the potential benefit of a stable financial system. i. iii financial market regulation – the indian perspective 8. reserve bank of india is the regulator of money, g - sec and otc credit, foreign exchange and interest rate derivatives including repo. in pursuit of the regulatory mandate, the reserve bank has been endeavouring to develop broad and deep markets. deeper and broader financial markets serve important public policy objectives in terms of improving the efficiency of capital allocation and absorbing the risks entailed in financing growth. as sound regulation is an essential institutional factor to ensure market development, reserve bank has been focussing on prudent regulations for furthering the development of money, g - sec and otc derivatives markets. reforms in the g - sec market carried out since the early 90s have ensured that the g - sec market is a well - organized and regulated market with world class market infrastructure for trading and settlement. 9. reserve bank of india ’ s approach to regulation and development of the financial markets has been guided by three broad principles. i. first, the menu of financial products available to enable economic agents to hedge emergent risks and meet their funding requirements should be widened. ii. second, the introduction of new products should follow a graduated process guided by the acceptance of the product by market participants. bis central bankers ’ speeches iii. lastly, the robustness