Follow Us:
Thursday, July 07, 2022

Corporate bonds: RBI Deputy Dovernor R Gandhi cautions against ignoring bank funding

"When we talk of developing a corporate bond market, we must be realistic about our goals. More importantly, we must not be blinkered in squeezing bank finance to forcibly take up corporate bond market," R Gandhi

By: PTI | Mumbai |
September 27, 2016 6:56:50 pm
RBI, Reserve Bank of India, Raghuram Rajan, RBI Raghuram Rajan, Housing price rise, price rise, Property price, business news Government and the Reserve Bank are working in concert to deepen the corporate bond markets (File Photo)

Even as the government and the Reserve Bank are working in concert to deepen the corporate bond markets, deputy governor R Gandhi Tuesday said we must be “realistic” in our goals and not squeeze out the bank financing in the process.

“When we talk of developing a corporate bond market, we must be realistic about our goals. More importantly, we must not be blinkered in squeezing bank finance to forcibly take up corporate bond market,” Gandhi said at the a seminar on BRICS bond market. “We would do well and act wisely if we keep our efforts in this direction,” he added. Noting that we are not alone in this aspect of reliance on bank finances, Gandhi said even the developed world countries like Germany and Japan have been bank finance-led stories.

In the comments, which come within a month of the RBI coming out with a slew of measures on deepening the corporate bond market, Gandhi also stressed on the need to create a new category of investors to tide over the challenges of finding takers for low-rated bonds.

“Loosening investment guidelines of insurance and pension funds will not be enough. What is required is to create an investor category to distribute risk widely,” the deputy governor said.

Subscriber Only Stories
Skin Allergies In Children – What parents need to know?Premium
What makes KuCoin P2P Trading Platform a Good Choice To Buy Crypto?Premium
Airtel Demonstrates Immersive Video Entertainment On 5G; Recreates Kapil ...Premium
Is It A Good Idea To Keep One Account For All Your Financial Transactions?Premium

Many observers have been calling for more liberal guidelines so that the large investor pool of insurance and pension funds finds a way into the corporate debt market. Gandhi said only 14 per cent of the investments in the domestic corporate bond market are in BBB or lower rated paper, while the AAA- and above paper dominates with a 80 per cent share.

Stating that it is “unrealistic” to expect the secondary market in corporate bonds to be as liquid as the government bonds, Gandhi said there is a need to deepen the activity. For this, transparency including the level of defaults will be very important, he said, adding that a bulk 95 per cent of the bond raising is through private placements.

Hot Offer Putin claims victory in Mariupol, leaving Ukrainian defenders holed up Subscribe Now

📣 Join our Telegram channel ( The Indian Express ) for the latest news and updates

For all the latest Business News, download Indian Express App.

  • Newsguard
  • The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.
  • Newsguard
Latest Comment
Post Comment
Read Comments
Advertisement
Advertisement
Advertisement
X