‘Steps to deepen corporate bond market in the offing’

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SummaryWe are examining what needs to be done to deepen the corporate bond market.

To help finance the country’s infrastructure sector that needs nearly $1 trillion in the next five years, the finance ministry on Friday said that it will take further measures to deepen the corporate bond market.

“We are examining what needs to be done to deepen the corporate bond market. The steps are all on the anvil. We are looking at them and we will be announcing those which are feasible very quickly,” department of economic affairs secretary Arvind Mayaram said on the sidelines of an infrastructure conference.

The need to strengthen India’s nascent corporate debt market has been raised by a number of committees including the Deepak Parekh committee on infra financing as well as a more recent panel that is looking into infrastructure funding for the Twelfth Five Year Plan.

Significantly, the Reserve Bank of India has recently also called for developing the corporate bond market. “India’s infrastructure funding requirements (estimated at around 10 per cent of GDP annually) need a robust corporate bond market for diversifying risk, enhancing financial stability, and for better matching of risk-return preferences of the borrowers,” RBI deputy governor Harun Khan had said last month.

India’s corporate bond market is estimated at 11.8 per cent of GDP, which is lower than the average for emerging East Asia and for Japan at 17.2 and 19.8 per cent, respectively.

Meanwhile, to improve fund flows to core sector projects, the DEA secretary also pitched for a “bouquet of rated” infrastructure projects to ensure timely funding through the Infrastructure Development Funds (IDFs).

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