RBI Is Working With SEBI On Addressing Retail Frenzy In Equity F&O Market, Says Das

The Reserve Bank of India and the country's markets regulator, the Securities and Exchange Board of India, are monitoring the high volume of retail trading in the futures and options segment, RBI governor Shaktikanta Das said on Tuesday.

SEBI is fully seized of the matter and is taking action when necessary, he added. Both the regulators discussed the issue under the aegis of the Financial Stability and Development Council.

"An early warning group is monitoring the issue. Currently, options and futures volumes are perhaps larger than the nominal GDP of the country. We have discussed this matter with SEBI... they will deal with it," Das said at ET Now's Leadership Dialogues 2024 event.

Having said that, all the parameters and indicators of the Indian economy and financial sector look stable at the moment, he added.

Trading activity in the equity derivatives segment has spiked in recent years due to huge retail participation. According to National Stock Exchange data, turnover volumes in derivatives grew exponentially over the last five years to Rs 79,927 lakh crore at the end of March.

This led to concerns from regulators, with SEBI mulling higher margins for selling option contracts and detailed disclosures for participants willing to trade in the derivatives segment.

On the credit market, Das mentioned that an increase in risk weight on unsecured loans and banks' lending to non-bank financial companies were "pre-emptive."

"...wherever we saw some signs of possible stress coming. There was nothing alarming when we took those actions. Our conclusion was that if we leave it unattended, it could have led to a possible crisis at a future date," Das said.

Further, Das underlined "slow moderation in inflation," which is keeping the monetary policy committee away from changing their stance or hiking the repo rate. The six-member panel kept its inflation forecast for FY25 at 4.5% in its latest monetary policy.

Food inflation is a concern, he said, adding that average food inflation has been 8% in the last 6-7 months. This is slowing down the disinflation of the headline number of 4.75%, Das said.

"Any form of adventurism should be shunned. It is better to stay on course and be watchful and play ball by ball," he added.

The central bank is maintaining a growth-inflation balance, Das said. "If you expect faster moderation of inflation, then we have to take much more drastic measures in terms of stance or rates. But we have to also weigh the growth sacrifice we would be making for the economy," he added.

On growth, the RBI expects economic growth momentum to be sustained. However, there are possible downside risks to growth in terms of geopolitical conflicts and rising capital flow fragmentation, Das said.

The RBI pegged India's GDP growth in FY25 at 7.2%.