<h1>Separation of Banking and Trading: proposed ring-fencing and proprietary trading limits may reduce market liquidity and raise costs.</h1> Post-crisis reforms promote separation of deposit-taking banking from trading-via ring-fencing, group-level separation or prohibition of proprietary trading-affecting liquidity, costs and compliance for banks in forex, government securities and swaps. Regulators also push central clearing, trade reporting, and higher capital for non-cleared OTC derivatives to reduce bilateral interconnectedness while concentrating risk in CCPs. RBI favours calibrated rupee internationalisation, selective trade settlement, hedging facilitation, strengthened oversight of unhedged corporate exposures, coexistence of OTC and exchange-traded derivatives, trade repository reporting and phased adoption of settlement and capital norms.