Developed economy needs developed financial markets first: RBI Deputy Governor Jain

 RBI Deputy Governor Rohit Jain

The financial markets required by a developed economy must be built before the economy reaches developed status, not afterwards, said Rohit Jain, Deputy Governor, RBI.

He observed that this will require more than an increase in issuance or trading volumes. The objective should be not merely to make our markets larger, but to make them deeper, broader, and more resilient, with regulation evolving alongside the market.

“India has traditionally relied on a bank-led financing model. That model has served the economy well. However, the scale, tenor and diversity of financing required for Viksit Bharat cannot be met through bank balance sheets alone.

“It will require a stronger complement of market-based finance—government and corporate bond markets for long-duration capital, and deeper foreign exchange and derivative markets for pricing and distributing risk,” Jain said at the Financial Institutions Leadership Conference organised by the Standard Chartered Bank recently in Mumbai.

Long-term capital needs call for stronger market-based finance

The Deputy Governor emphasised that India will require long-term capital for infrastructure, manufacturing, urban development, technology and the expansion of Indian enterprises, both domestically and internationally.

The scale and tenor of these requirements make it important to broaden the channels through which savings are converted into investment.

“At the same time, the pattern of domestic savings is evolving. Alongside bank deposits, a growing pool of household savings is being channelled through insurance, pensions, mutual funds and other market-linked instruments.

“Well-functioning financial markets can connect these long-term savings with long-term investment needs. This is where different market segments perform complementary functions. Government securities markets finance public investment and provide a benchmark for pricing other rupee assets.

“Corporate bond markets connect long-term savings with private investment. Money markets strengthen monetary transmission and liquidity management. Foreign exchange and derivative markets allow businesses, financial institutions and investors to manage risks rather than avoid economically valuable opportunities,” he said.

Deeper markets can improve capital access and risk distribution

Market development is, therefore, not an agenda confined to treasuries or dealing rooms. It has a direct bearing on the cost and availability of capital across the economy.

The Deputy Governor said a wider range of enterprises must also progressively gain access to market-based finance. This cannot be achieved merely by introducing new instruments or encouraging investors to assume more risk. It requires investors with the capacity to differentiate and price credit risk, reliable recovery mechanisms, and markets through which such risk can be managed and redistributed.

Further, deeper markets would also enable financing risks to be shared across a wider and more diverse set of participants, rather than remaining concentrated on the balance sheets of a limited number of intermediaries.

Published on July 28, 2026