Shankar said at the Bombay Chamber of Commerce and Industry, “The focus is on reforming the complementary-repo and derivatives-markets, diversifying the investor base, both domestic and global, and improving access to borrowers at the lower end of the credit spectrum.” is required.” on Wednesday.
Derivatives and repo markets can play a good role in helping the corporate bond market gain momentum as they are billed as popular hedging tools for sophisticated investors betting on bonds sold by companies. “Furthermore, market development and improvement will continue to be an ongoing exercise,” he said.
Diversifying the investor base and access to low-rated companies to raise bonds will help develop the corporate bond market, which is still small in major Asian emerging markets, including Malaysia, Korea and Japan. ChinaAccording to the Deputy Governor of RBI.
Although the corporate bond market has made good progress, secondary market volume is still low.
The outstanding stock of corporate bonds has increased four times – from ₹10.51 lakh crore at the end of FY2012 to ₹40.20 lakh crore at the end of FY22.
“As much as we need to take these steps, it will serve us well to lower our expectations on the degree of liquidity in the secondary corporate bond markets,” he said.
The absence of risk appetite beyond top-rated bonds is billed as another major deterrent. In 2021-22, 1,235 corporate debt securities amounting to ₹22.55 lakh crore were rated.
The slant is much more pronounced when viewed in terms of value – 80% of the issuances were rated AAA and the other 1.5% AA in terms of value. “While we can discuss the reasons for this trend, it is clear that the corporate bond market largely caters to the needs of high-end corporates,” Shankar said. He said that if international experience is anything to go by, the best we can achieve may be to reduce the liquidity we are used to in government bond markets or equity markets.