2007. pending legislative changes, feasible options could be explored based on understanding with the government. 20. there are examples in emerging markets which have attempted solving the netting issue, such as, the recent malaysian example. malaysia has enacted unified legislation for all kinds of financial services [ financial services act 2013 ] which provides a ‘ safe harbour ’ for “ qualified financial agreements ” ( qfas ). approach to market regulation 21. in order to have a more focused approach towards market development and regulation along with a surveillance system for ensuring market integrity and stability, a new department called financial markets regulation department ( fmrd ) has been set up at rbi. the technical advisory committee ( tac ) on financial markets has recently been reconstituted to guide our future agenda. going forward, the explicit entity - neutral legal bis central bankers ’ speeches framework prevailing in india for regulation of money, interest rate and currency markets will be leveraged, to put in place a structured process focusing on ( i ) making market access norms easier for all participants ( ii ) expanding the menu of products and participants across all segments ( iii ) strengthening market infrastructure in line with global standards ; and ( iv ) leveraging the market and surveillance mechanism for policy inputs. interest rate options 22. in line with the above approach, introduction of interest rate options in the indian market is a key part of agenda. a working group has already been constituted under the tac to comprehensively look into all relevant issues and give its recommendations on the product design. 23. the committee is deliberating on the hedging requirement for these options. for retail participants, a small threshold without explicit underlying requirement is being considered. this would help retail participants and small enterprises to hedge their risk without much documentation burden. for larger corporates, while the underlying exposure requirement may be necessary, but similar to forex hedging, concept of “ anticipated interest rate exposures ” is being explored. review of fpi limits 24. the limit for fpi investments in government securities in india has been part of the larger framework for capital account management. the risks of sovereign borrowing in foreign currency, the “ original sin ”, have been extensively analysed over the years, particularly after the asian crisis in the nineties. the concerns relating to sudden stops, however, are as relevant for domestic currency denominated debt as foreign currency debt. it is therefore imperative to balance the benefits of lower yields in normal times and the costs associated with increased volatility and yield

harun r khan : financial market regulation in india – looking back, looking ahead keynote address by mr harun r khan, deputy governor of the reserve bank of india, at the fimmda ( fixed income money market and derivatives association of india ) – pdai ( primary dealers ’ association of india ) 16th annual conference 2015, prague, 17 august 2015. * * * the speaker acknowledges the contributions of shri vaibhav chaturvedi and shri vivek singh of the reserve bank of india. 1. mr. jiri rusnok, former prime minister & member of the board of the czech national bank ; dr. m. venkatachalam, charge d ’ affairs indian embassy, prague ; mr. n. s. venkatesh, chairman fimmda ; mr. pradeep madhav, pdai ; distinguished panelists and all the delegates. it gives me great pleasure to be delivering the keynote address for the fimmda – pdai annual conference in this culturally rich, historically vibrant, naturally blessed city of prague which still maintains its old - world charm. 2. the theme for this year ’ s conference evolving markets – institutions & regulations rightly underscores the role of both the regulations as well as institutional practices in influencing the market development. the post - crisis overhaul of the global financial regulatory regime may, however, have altered the balance between the two as newer regulations have been changing the institutional practices themselves in very fundamental ways in many jurisdictions. it may still be a bit early to definitively conclude about the impact of these changes on evolution of markets going forward. the shift to ccps and increased costs of otc transactions ; increased capital requirements for trading activities ; new leverage and liquidity regimes, etc. all are contributing to reshaping the financial markets landscape globally. while the state of financial markets may be qualitatively heterogeneous across countries, the harmonized implementation of the reform program is an essential necessity countries are confronted with. 3. given the above backdrop, i thought it appropriate on this occasion to undertake a broad assessment of the evolution of our own financial markets and the issues we have been grappling with. it is critical for us to learn the right lessons from the experience of other countries in reshaping their regulatory frameworks while we debate the right model. there could be different viewpoints and perspectives but it is imperative that certain basic principles are agreed upon. introduction 4. regulation of financial