India's corporate bond market, which stands below 5 per cent of the GDP at present, has the potential to reach to a level of 15 per cent during the 12th Five Year Plan (2012-17) on back of policy and regulatory reforms, according to a survey by CII.
"A robust corporate bond market is imperative to meet the funding needs of the emerging Indian economy. Concerted policy and regulatory reforms hold the key for the private sector to meet its target share of 47 per cent in total infrastructure investment during the 12th Plan," CII Director General Chandrajit Banerjee said.
As per findings of the survey, 57 per cent of industry stakeholders, including issuers, investors, market makers, credit rating agencies and technical experts believe that the actual potential of corporate bond market as a percentage of GDP is 12.5 to 15 per cent which could be realised with the help of policy and regulatory reforms.
Regarding the impediments in the way of corporate bond market in realising its full growth potential, industry stakeholders said lack of conducive regulatory framework, inexistence of incentives and support mechanisms for willing market makers and inadequate credit enhancement facility were the biggest challenges in deepening of the market in India.
To address these issues, industry stakeholders expect a slew of measures to be undertaken by Ministry of Finance and regulators (RBI and SEBI) which would encourage the private sector to mobilise long term resources from the debt market.
Industry stakeholders suggested that strong bankruptcy laws must be formulated by amendments to SARFAESI Act to enable recovery of bond holder dues by Debenture trustees through Debt Recovery Tribunals, standardising documentation, and mandating use of unified market conventions for standardisation, the survey said.