The tax reforms in stamp duty, relaxation in exchange controls on corporate bonds and less rigid investment mandates for the institutional investors are needed for the vibrant growth of Indian corporate debt market, Michael Snyder, chairman, Policy and Resources Committee, City of London Corporation said.
After the release of a research report – ?The development of India’s corporate debt market? prepared by City of London, Michael Snyder told reporters that the Indian capital market has developed rapidly over the last two decades, the corporate debt market remains small, restricted and illiquid. “This segment requires proper attention for the overall development of the capital market”, he said.
The report quoted RH Patil Committee recommendations for a standard rate and the maximum payable should be capped. The restriction on foreign holdings on corporate debt is also anomalous which is more onerous than the corresponding restrictions on foreign investment in equities, on foreign direct investment and on foreign investment in derivatives. Snyder said that a controlled and phased relaxation should be extended for institutional investors like Life Insurance and pension funds. These reforms will help the corporate debt market to join the financial sector, he said. The report said that the corporate bond market is affected by a number of regulatory agenices. The jurisdiction of Sebi and RBI seems to be overlapping in regulating corporate bond market. There needs to be clarity in this regard.
He said that City of London Corporation and India can collaborate in advice and issuance expertise, the provision of structured finance, credit management and the provision of education and training in the management and operation of corporate debt markets. With regard to sub-prime mortgage crisis, he said that India is politically stable. The markets are open though the pace of change remains a cause of concern in the financial sector.
