The Finance Ministry may soon relax investment guidelines for pension and provident funds and insurance companies to enable the participation of long-term and stable class of investors in the corporate bond market.
An indication to this effect was given by Economic Affairs Secretary Arvind Mayaram at the India Infrastructure Investment Forum here on Friday.
Mayaram, who inaugurated the Forum, said the Government was very keen to develop the corporate bond market.
He admitted that policymakers had been talking about this for several years, but indicated that the Finance Ministry was now looking at it more closely.
“This (relaxation in investment guidelines) is an area we are actively looking at. We will very soon come out with new guidelines. We are examining what needs to be done to deepen the corporate bond market,” Mayaram said.
Most countries that have really been able to spend heavily on infrastructure have depended on the corporate bond market, he said.
Currently, pension funds are required to keep 55 per cent of their debt investments in Central and State Government securities.
Insurance companies are not allowed to hold over 10 per cent of the equity of investee company. Also, at least three-fourths of their debt portfolio should be invested in triple-A rated bonds.
The Finance Ministry is also looking at amendments to the rules formulated by the Corporate Affairs Ministry, income tax law and SARFAESI law, Mayaram said.
The legal amendments are required to strengthen the regulation for corporate debt, he said
The Finance Ministry is also looking at removal of legal and regulatory constraints for introduction of new products such as covered bonds, municipal bonds and credit defaults swaps.
Mayaram said there was a need to look at new instruments for supporting investments in infrastructure. “We are open to all ideas and more suggestions as we would like to widen the repertoire of instruments available for financing of infrastructure,” he said.
He also said that lot of sovereign wealth funds and foreign pension funds had evinced interest in infrastructure debt funds.