Shift away from bank-dominated financial system: Economic Survey

"Some of the issues...include drawing up a road map for a structural shift from a bank-dominated financial system to a more diverse financial system where top-rated corporates access finance from capital markets," the Survey said.

Strengthening legal framework for regulation of corporate debt by amendments in rules, relaxation of investment guidelines for pension, provident, and insurance funds to enable participation of long-term investors in corporate bond market are also needed.

Bringing new products and making nascent products like covered bonds, municipal bonds, credit default swaps, credit enhancements, and securitisation receipts more attractive may be considered for public issuance of bonds at reduced cost, it said.

"Improving the market infrastructure for enabling liquidity, transparency in price discovery, and stimulating growth in trading volumes also need to be suitably addressed."

The Survey said a reasonably well-developed corporate bond market is very much required to supplement banking credit, equity market as well as infrastructure development.

Though India has been a late starter in reforming financial markets, these reforms have been encouraging but challenges are still there, it noted.

"...there are still certain challenges in the development of the Indian financial sector which need to be addressed to make it an important avenue for productive channelisation of savings by domestic investors and a preferred investment destination for international investors."

Besides, need for long-term finance for infrastructure projects is another

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