Government Mulls to Develop Strong Corporate Debt Market

The Indian government finally seems to have woken up to the need of a strong corporate debt market in the country and has entrusted the task to the oldest regulator in the financial sector. The Reserve Bank of India (RBI) had in fact earlier too pointed out the need for a stronger debt market in the country in its publications and will now move rapidly to achieve this end.

The issue was discussed in a meeting of the high-level co-ordination committee on financial markets (HLCCFM), comprising financial sector regulators including the RBI and the SEBI and senior finance ministry officials. The participants discussed a schedule for the reforms in debt market that have been pending for many years.

According to the RBI officials, the HLCCFM reviewed the recommendations made by various committees on the matter till date, and market participants, measures taken so far for developing the corporate bond market and what new initiatives were needed to be taken towards this end.

The central bank has now been asked to prepare a time bound road map for strengthening the domestic bond markets. Various economists have pointed out that to sustain a high economic growth trajectory, in the Indian context, a vibrant corporate bond market was a must. It will boost Indian companies’ access of funds from non-banking sources and hence improve overall level of investment.

The RBI now will come up with a working paper on the matter and the same will be presented first to the HLCCFM, and then made public for receiving comments. However, so far, the committee has not set any time frame for finalising the roadmap to strong debt market.