Reserve Bank of India Establishes Financial Markets Committee to Steer Operational Policy

The Reserve Bank of India has established a seven-member Technical Consultative Committee for Financial Markets to guide regulatory policy. The panel will advise the central bank on the resilience and efficiency of the country's money, government securities, and foreign exchange markets.[2][5]

Deputy Governor Rohit Jain, who currently oversees the Financial Markets Regulation Department, will chair the new committee. The central bank designed the group to create a structured, ongoing dialogue with market participants rather than relying on informal consultations.[2][4]

The formation follows a formal announcement made during the central bank's October 7, 2026, monetary policy review. The regulator seeks to address rapidly evolving market infrastructure and the operational challenges that accompany complex financial innovations.[4][5]

Navigating Market Volatility

The regulatory move arrives during a period of sustained geopolitical conflict and elevated energy prices that have introduced significant volatility into Indian markets. Foreign investors have maintained relentless outflows from domestic equity markets over the past two years.[2]

India's foreign exchange reserves recently fell by $66 billion over a seven-week period, as the central bank sold dollars to stabilize the currency. That decline followed a record reserve high of $785.7 billion recorded during the week ended September 4, 2026.[2]

Managing these currency fluctuations requires a delicate balance of market interventions and robust trading infrastructure. The central bank relies on deep, liquid foreign exchange markets to execute its stabilization strategies without causing outsized price distortions.[2][5]

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Against this macroeconomic backdrop, the central bank raised the policy repo rate by 25 basis points to 5.50 percent last month to ensure the transmission of monetary policy. The new consultative committee will help policymakers monitor how these liquidity measures impact different market segments.[2][4]

“RBI may take some steps on liquidity but it may have implications of other markets,” a market participant told Business Standard regarding the interconnected nature of the financial system. “Understanding those dynamics are also important.”[2]

The committee will specifically examine unintended market frictions caused by recent regulatory interventions. One recent example involved a concessional swap facility for foreign currency non-resident deposits, which aimed to boost reserves but inadvertently triggered a sharp increase in systemic liquidity.[2]

Composition of the Committee

The central bank selected seven external members who represent a broad cross-section of the financial sector. The roster includes executives from public, private, and foreign banks, alongside specialists in market infrastructure and regulatory frameworks.[2][5]

Ananth Narayan, a former whole-time member of the Securities and Exchange Board of India and current professor of practice at IIT Bombay, brings regulatory and academic perspective to the panel. His inclusion signals a focus on cross-regulatory alignment between banking and securities markets.[4][5]

The State Bank of India is represented by Deputy Managing Director Shamsher Singh, who also serves as the chairman of the Fixed Income Money Market and Derivatives Association of India. His dual role connects the committee directly to the primary body governing domestic bond markets.[4][5]

The fixed income and derivatives markets require constant calibration to maintain liquidity, especially during periods of monetary tightening. The inclusion of FIMMDA leadership provides the central bank with direct visibility into the daily operational challenges faced by bond traders.[4][5]

Private sector banking perspectives will come from Neeraj Gambhir, executive director at Axis Bank, and Shailendra Jhingan, head of treasury and economic research at ICICI Bank. Both institutions manage massive domestic treasury operations that react daily to central bank policy shifts.[4][5]

Foreign institutional experience is provided by Aditya Bagree, managing director and head of markets at Citibank India, and Ridham Desai, managing director of Morgan Stanley India. Their presence ensures the committee considers global capital flows and international market standards.[4][5]

Nand Kishore, managing director of the Clearing Corporation of India Ltd, completes the external roster. His appointment highlights the central bank's focus on the operational plumbing that settles trades and mitigates counterparty risk across the financial system.[4][5]

Infrastructure and Operational Mandate

The Clearing Corporation of India plays a systemic role in the domestic financial architecture, handling the settlement of government bonds and foreign exchange transactions. Direct representation on the committee ensures that any proposed trading innovations align with the country's clearing capabilities.[4][5]

The committee's terms of reference extend far beyond basic monetary policy feedback. Members are tasked with evaluating the entire transaction lifecycle, including trading, clearing, settlement, and reporting mechanisms across all regulated asset classes.[4][5]

The efficiency of financial markets relies heavily on the underlying systems that process transactions and guarantee orderly settlements. Operational bottlenecks in these clearing frameworks can rapidly degrade market confidence and freeze liquidity during stress events.[5]

The panel will review existing regulatory frameworks to identify opportunities to deepen and broaden market participation. This includes assessing how new financial products and derivatives can be safely integrated into the domestic trading ecosystem without introducing systemic vulnerabilities.[2][5]

“The members will provide market feedback to the regulator, may be on products, what measures can be taken when there is untoward volatility,” a market participant told Business Standard. This direct line of communication aims to ground regulatory theory in daily trading realities.[2]

The group will also monitor international developments and emerging risks that could spill over into Indian markets. By tracking global financial innovations, the central bank aims to proactively adapt its infrastructure before external shocks arrive.[2][4]

Institutionalizing Market Feedback

While the Reserve Bank of India has historically consulted with industry stakeholders, those interactions were often ad hoc. This new framework institutionalizes the feedback loop, requiring the committee to convene at least once every quarter to review market conditions.[2][5]

The central bank previously operated a technical advisory committee on monetary policy, but that body was discontinued in October 2016. Its dissolution coincided with the operationalization of the flexible inflation targeting regime and the creation of the six-member monetary policy committee.[2]

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The new financial markets committee fills a different structural gap, focusing strictly on market mechanics rather than setting interest rates. It provides a formal channel for institutions to flag practical difficulties arising from new compliance burdens.[2][5]

By separating operational market feedback from monetary policy decisions, the central bank can address structural inefficiencies without altering its broader economic targets. This dedicated focus ensures that infrastructure upgrades receive sustained attention from senior regulators.[2][5]

“There is always a trade-off between financial market development and macroeconomic dynamics,” a financial market expert told Business Standard when discussing the panel's mandate. “The committee should look at ways to balance the two.”[2]

The central bank retains the authority to refer specific macroeconomic considerations or market-related disputes directly to the panel for specialized examination. This allows the regulator to stress-test proposed rules with active practitioners before implementation.[5]

Strengthening Systemic Resilience

The central bank has not specified whether the committee's formal recommendations will be made public or remain confidential internal advisories. However, the structured quarterly meeting schedule guarantees a persistent dialogue regardless of public disclosure.[5]

The immediate priority for the panel will likely involve navigating the current global interest rate environment and its impact on domestic bond yields. Ensuring smooth liquidity distribution remains critical as the central bank manages its calibrated tightening stance.[2][4]

The creation of this committee signals an institutional effort to strengthen consultation between the regulator and market participants. Financial markets are becoming increasingly complex and interconnected, requiring expertise from across different segments of the financial system.[5]

The success of the committee will be measured by the resilience of India's market infrastructure during the next major financial shock. A more robust clearing and settlement ecosystem would validate the central bank's collaborative approach to regulation.[5]