As a result of various reforms, the financial markets have now transited to a regime characterised by market-determined interest and exchange rates, price-based instruments of monetary policy, current account convertibility, phased capital account liberalisation and auction-based system in the government securities market.
A noteworthy feature is that the government securities and corporate debt market are essentially domestically driven since FII and non-resident participation in these markets are limited and subjected to prudential ceilings. The Reserve Bank has taken a proactive role in the development of financial markets.