Tag: retail market

Mumbai: Reserve Bank of India (RBI) governor Shaktikanta Das on Tuesday spoke of measures to deepen retail participation even as he hinted at preparations to normalise the liquidity pumped into markets in the wake of the pandemic.

“As markets settle down to regular timings and functioning and liquidity operations normalise, the RBI will also conduct fine-tuning operations from time to time as needed to manage unanticipated and one-off liquidity flows so that liquid conditions in the system evolve in a balanced and evenly distributed manner,” Das said. He was delivering the keynote address at the annual conference organised by the Fixed Income & Money Market Derivatives Association (FIMMDA) and the Primary Dealers Association of India (PDAI).

Das also said that the RBI will work with primary dealers to popularise STRIPS — Separate Trading of Registered Interest and Principal of Securities. This is a system that will enable conversion of government securities into zero-coupon bonds where a lump sum is paid on maturity. This will be one of the measures by the RBI to develop a retail market for government securities.

Under the STRIPS mechanism, if there is a long-term bond for, say, 10 years, a primary dealer can sell the principal to one investor and the periodic interest payments to other investors. The advantage is that an investor looking for short-term government bonds can buy the coupon (interest) payments and a long-term investor can buy only the principal.