New products to hedge market risk

RBI ANNUAL REPORT

The Reserve Bank of India today said it would introduce new instruments to help market players hedge market risks and continue its vigil on developments in light of uncertainty in the global financial markets.

With increasing liberalisation and integration with global financial markets, its focus will be on ensuring that domestic financial market participants build capability to absorb unanticipated and large shocks.

Besides expanding product suit, it will also attempt to improve market infrastructure and tally of market players to deepen various segments of the financial markets, RBI said in its annual report for 2007-08.

The central bank will facilitate further integration of the markets to strengthen the monetary transmission mechanism and ensure efficient dispersal of risk amongst market participants.

 

These steps are crucial for facilitating move towards fuller capital account convertibility.

Although the domestic financial markets have not been seriously impacted by the turbulence overseas, the impact through the financial flows, in particular, on the equity market and, consequently, on the foreign exchange market in India cannot be ruled out.