Budget 2018: Large corporates may soon have to meet at least a quarter of their funding needs through the bond market, the government said on Thursday. Moreover, the pool of investment-grade corporate bonds will now be bigger, with \u2018A\u2019 grade bonds becoming eligible for investments. The idea is to deepen the corporate bond market and nudge companies to diversify their sources of funding. Finance minister Arun Jaitley said the Reserve Bank of India has issued guidelines to nudge corporates access the bond market. \u201cSebi will also consider mandating, beginning with large corporates, to meet about one-fourth of their financing needs from the bond market,\u201d Jaitley said while presenting the Budget for 2018-19. \u201cCorporate bonds rated \u2018BBB\u2019 or equivalent are investment grade. In India, most regulators permit bonds with the \u2018AA\u2019 rating only as eligible for investment,\u201d Jaitley said, adding, \u201cIt is now time to move from \u2018AA\u2019 to \u2018A\u2019 grade ratings.\u201d According to rating agency ICRA, more than 80% of bond issuances come from the 'AAA' and 'AA'-rated pool of corporates and the top 10 issuers account for nearly 40% of issuances. Ajay Manglunia, EVP, Edelweiss Financial Services, said the measures will help add liquidity and new players getting into the market will have a vibrant market. After Budget 2018 will your income tax go up or down? Find out with this Income Tax calculator Lakshmi Iyer, chief investment officer (debt) and head \u2013 products, Kotak Mahindra Asset Management Company, said while the fine print on the proposals will have to be watched, they are directionally positive. \u201cThey are trying to diversify the sources of borrowing. By mandating a 25% quota for the bond market, you are limiting corporates' dependence on banks and the risk associated with it.\u201d Also\u00a0Watch | 5 Must-Know Budget-Related Terms [jwplayer 6Xf4LEd7] The proposed measure to expand the pool of investment-grade issuers will help remove entry barriers for lower-rated corporates, Manglunia said. \u201cSmall borrowers were so far going only to banks to raise funds through the loan route and through bonds, they will always get better pricing because investors are keen to diversify their investments.\u201d Iyer noted that investors are quite open to more borrowers entering the bond market and they would be happy to include smaller companies in their portfolio.