in search of unexploited market and unharvested returns. we would also work towards enhancing the overall liquidity in government securities market in terms of availability of two - way quotes in less liquid maturities through targeted market making schemes. further, measures towards activation of a securities lending and borrowing programme, inter - operability of depositories for smooth transfer of ownership in securities will receive our attention. we are also engaging government for active consolidation of government debt through frequent buyback / switch operation. 2. it is recognized that non - resident investors bring volume and liquidity to the financial markets for the simple reason that there is a large corpus of savings available overseas, forever in search of yields. there has been a gradual effort to remove the barriers to entry for nr investors in the debt segment. the gradual process is motivated by the possibility of sudden reversals causing turbulence in the interest rates. even though there has been a great deal of interest from foreign investors in rupee debt securities in recent times which protects the indian borrower from foreign exchange risk in contrast with foreign currency debts, the threat to stability in the interest rate market and some residual threat to stability in the forex market remains. be that as it may, greater access to foreign investors to the rupee debt market – cash as well as derivative will gradually be considered. 3. it is estimated that five years down the line, the demand for bonds will significantly outstrip the supply. it is a paradoxical situation. is the market barring borrowers from the market? the issues relating to cds comes to mind. the basic purpose of cds was to enable lower rated borrowers to access the market while the investor is protected against default by buying a cds. but in a market, where only highly rated entities issue bonds, there will be no need for a cds or rather, a cds will leave nothing on the table for the investors, in comparison with a government security. bringing liquidity into this and other derivative product needs introspection. 3 / 5 bis central bankers'speeches 4. the risk management at market level is pretty robust, with central counterparty settlement, exchange traded products, trade repositories, legal entity identifier, etc. but there is scope of improvement at entity level as far as financial institutions are concerned, which will be tested with introduction of new accounting standards. some other aspects of regulation – e. g., treatment of cash margins as deposits, payment of interest on such margins,

necessarily bring efficiency to the market. liquidity essentially means easy and frictionless entry into and exit out of investment positions without loss of value. several prerequisites underpin this : large number of participants, fewer barriers to entry, large volume of transactions, pricing efficiency, absence of risk - free arbitrage and so on. 4. lastly, there must be efficient risk management. as the financial crisis has demonstrated, a market without adequate risk management measures is prone to failure with enormous economic and social cost. i had mentioned earlier about the range of financial products, the caveat is that the complexity of these should not run ahead of the understanding of their risk implications. measures like move to exchange traded products, central counterparty clearing, bilateral margining and reporting positions to trade repositories are aimed at improving the risk management practices. 6. how do our fixed income markets perform against these standards? let me list some stylized facts. 1. government securities, that constitute the largest segment of the fixed income market, stand at about ₹ 58 trillion, treasury bills accounting for another about ₹ 6 trillion. though the primary issuances have been quite seamless, only the 10 year benchmark security accounts for bulk of the trading volumes. indeed, liquidity in this bench mark security as represented by the bid - ask spread is impressive, and according to a recent bis study, among the best amongst emerging markets. liquidity, however, almost completely dries off in other off - benchmark securities, which does not reflect well on the market. 2. the corporate debt market has registered impressive growth. in the five years between june 2014 and june 2019, the market size has grown from ₹ 14. 43 trillion to ₹ 30. 63 trillion. out of this, the size of structured notes market has grown from ₹ 8. 78 billion to ₹ 230 billion1. these figures underscore the growing maturity of the market. we must however note that there are in excess of 24000 instruments outstanding, reducing the average outstanding per instrument to a small figure. on the other hand, the issuances in recent times have been predominantly ( upto 75 % ) by the financial firms. besides, most of the issuances have been through private placement. the secondary market in corporate debt is so illiquid that we can very well say there is no such market. the rating transition of some corporate debt, particularly those issued by financial firms, has been phenomenal – from sound credit to