The R10.4-lakh crore bond funding required for these two sectors translates to an average issuance of R2.1 lakh crore annually in next five years. This is nearly 60% higher than the average annual issuances made by these sectors in last three years. This calls for steps to deepen the bond market by encouraging greater foreign participation, and by liberalising investment norms for long-term investors," said Crisil CEO Roopa Kudva.
The report also said that currently bond market finances the infrastructure sector indirectly through specialised institutions. In 2012-13, just five financial institutions issued nearly 60% of the (R1.3 lakh crore) bonds raised to fund infrastructure. Therefore, encouraging direct access of infra projects to bond market is a key priority, Pawan Agrawal, Senior Director, Crisil.
The report said five banks have raised R6,000 crore by issuing Tier II bond this year, which is a good begining. The key challenge lies in raising Tier I nonequity instruments, due to their riskier features of coupon discretion and principal loss absorption at specified capital thresholds, Agrawal said.