Corp debt repos may grab focus

Written by OP Thomas | Mumbai, Oct 28 | Updated: Oct 29 2007, 07:09am hrs
The Reserve Bank of Indias mid-term review of the monetary policy might suggest measures to improve corporate debt segment trading, bankers said.

Bankers are expecting an introduction of repos in corporate debts or bonds. We do not expect any major announcements though, but, at least, some move in that direction is likely, said an executive of a state-run bank.

The market focus is on government debts because trading volumes remain a concern for most bankers.

The primary market has been active but the secondary market has been restricted to a daily turnover of just Rs 200 crore on an average, said Pradeep Madhav, managing director, STCI Primary Dealer Ltd.

The corporate debt market has been largely relegated to dealing with primary issues, which then get offloaded to provident funds in secondary trades. Beyond this, the secondary market has been virtually inactive, primarily due to the liquid nature of corporate debts.

The repo market in corporate debts is expected to infuse the much-needed liquidity and improve vibrancy in the debt market. Corporate bonds are not self-financing in nature and permitting repos is not enough unless there is a trading platform, said a chief executive of a bank.

There is no platform, unlike the government bonds, to two-way trading and electronic settlement cycles.

Bankers are bullish on the RBI to at least take a small step in its policy review announcement on Tuesday.

There has been a committee formed by the RBI to study this segment of the market, said an executive of a private bank. But we expect some initiative from the RBI towards this (repo) move, he added.