DEBT MARKET

NAME:- SAYALI RAMESH KELUSKAR

STD:- S.Y.BFM
ROLL NO:-18
 RESERVE BANK OF INDIA (RBI)

INTRODUCTION:-
The Reserve Bank of India (RBI) is India’s central bank, responsible for the issue and supply of
the Indian rupee and the regulation of the Indian banking system. It also manages the country’s main
payment systems and works to promote its economic development. Until the Monetary Policy Committee
was established in 2016, it also had full control monetary policy in India. The original share capital was
dividend into shares of 100 each fully paid. Following India’s independence on 15 August 1947, the RBI
was nationalized on 1 January 1949. It is a member bank of the Asian Clearing Union. The bank is also
active in promoting financial inclusion policy and is a leading member of the Alliance for Financial
Inclusion (AFI). The bank is often referred to by the name ‘Mint Street’.
 ROLE OF RBI IN PRIMARY DEBT MARKET :-

The RBI acts as the Register and Transfer Agent (RTA) for government securities. It also
regulates the participation in this market. The participation of foreign institutional investors is also
regulated by RBI based on policy considerations. RBI increased their investment ceiling in the gilts
Market in order to attract FIIs in this market. However , the reforms process has envisaged a clear
separation of monetary policy and debt management. A step towards this was FRBM Act, 2004 under
Which the RBI cannot bail out the primary auction developments. The Primary Dealer system was
revamped to ensure the safe passage of auctions with minimum guaranteed bidding commitments by
PDs. In a move emphasizing the functional separation of debt management and monetary
functions,RBI constitute a new department named as financial market department (FMD) in July
2005.Further the budget of 2006-07 proposed to establish in middle office to facilitate the transition
to a full-fledged debt management office(DMO).The reserve bank has proposed amendments to the
reserve bank of India Act, 1934 which would take away the mandatory nature of management of
public debt by the reserve bank and vest the discretion with the central government to undertake the
management of the public debt either by itself or to assign it to some other independent body , if it so
desires.
 ROLE OF RBI IN SECONDARY DEBT MARKET

The development of a primary market for government securities with varied investor base
hinges upon the existence of a well-developed secondary market. A well-developed government
securities market requires a system of transparent pricing and allotment mechanism which reduces
transaction cost and improves market efficiency. The Reserve Bank of India has bought government
bonds and treasury bills from the secondary market for the first time this year to push the yields down
amid rising worries about a blow out of fiscal deficit as the government spends to cushion the loss of
economic activity due to the lockdown.
The regulator which is also an investment banker for the government has bought bonds and
treasury bills worth Rs. 14,660 crores in the second week April alone, signalling that it is moving in the
direction to monetise government debt as both the central, and state governments battle a collapse in
revenues. Purchase of bonds and treasury bills were done by the RBI on April. 6,7 and 8th of this month,
data from the weekly Statistical Supplement shows. It did not disclose the kind of securities it bought.
This secondary market buying of sovereign papers will help infuse liquidity further,” said
Naveen Singh, head of trading at ICICI Securities Primary Dealership Ltd. “last year too, the central bank
did it but only after announcing it. Such move helps build investor confidence in the market as it
indicates RBI’s promptness to react.” We could see some unconventional steps too, given the nature and
magnitude of the problem at hand.
 FUNCTIONS OF RBI

In the Indian context, the basic functions of the Reserve Bank of India as
enunciated in the Preamble to the RBI Act, 1934 are: “to regulate the issue of
Bank notes and the keeping of reserves with a view to securing monetary
stability in India and generally to operate the currency and credit system of
the country to. The central bank of any country executes many functions
such as overseeing monetary policy, issuing currency, managing foreign
exchange, working as a bank for government and as a banker of scheduled
commercial banks. It also works for overall economic growth of the country.
 COMMITTEES SET UP BY RBI

In August 2020, RBI set up a five membered Committee under the

chairmanship of KV Kamath, the former CEO of the ICICI bank in order to
make recommendations on the norm for resolution of COVID-19 related
stressed loans. In order to restructure the loans up to 15,000 crores the expert
Committee was tasked with coming up with a sector specific plan for
successful resolution of the stressed loans. The parameters were to include
aspects related to leverage, liquidity and debt serviceability
Thank You