In his key note address on development of the debt market, RBI governor Bimal Jalan pointed out that financial markets cannot really develop unless they are perceived as "safe investment" by the individual investor.

Speaking at a seminar on development and reforms in the financial markets and institutions held in Mumbai on Friday, the RBI governor reiterated that domestic debt markets lack retail investor persepective, which is necessary for a vibrant and efficient market. "Only 15 per cent of non-governmental paper is considered safe by the retail investor, and over 25 per cent of the issuers of debt instruments default on their obligations," he said, quoting a survey conducted by the society for capital market research and development.

Echoing the sentiments expressed by the Reserve Bank chief, infrastructure development committee chairman Rakesh Mohan said that anactive secondary market for debt was a pre-requisite for cost-effective infrastructure financing, more so since close to $50 billion is required for India's infrastructure development.

"This level of investments warrants active private sector participation. The Infrastructure Development Finance Corporation (IDFC) is looking at innovative products that mitigate risks associated with infrastructure financing and encourage the flow of cost effective private capital into this segment," said IDFC deputy managing director Nasser Munjee.

The near-absence of securitisation, market reference rates and risk-management products have hindered an efficient market system, he added.

While agreeing with the views expressed by earlier speakers, Prithvi Haldea managing director of Prime Database said that of the 30,983-crore debt issues last year, over 98 per cent were made through the private placement route. But there were many instances of unfair trade practices and poor dilligence by the issuers.

Dispelling thefears that the Reserve Bank may soon introduce stringent regulations, Jalan stressed on the right balance between regulation and freedom and added that the focus will now be on a few prudential norms which will ensure a stringent system of disclosures and transparency," he said.