Another attempt is being made by the Centre to deepen India’s corporate bond market with LIC being asked to set up a dedicated fund to provide credit enhancement to infrastructure projects.

Announcing a slew of measures in the Union Budget, Finance Minister Arun Jaitley observed that the fund will help in raising the credit rating of bonds floated by infrastructure companies and facilitate investment from long-term investors.

‘Action still missing’

The RBI will issue guidelines to encourage large borrowers to access a certain portion of their financing needs through market mechanism instead of through banks, said the Budget announcement.

Tejesh Chitlangi, Partner, IC Legal, said, “For the past several years, discussions have been going around deepening of the corporate bond market and the need for more liquidity in this segment. Despite committees being formed and several proposals being made from time to time, action is still missing on this front.”

The government also plans to include debt securities and pass-through securities issued by securitisation SPVs in the investment basket of foreign portfolio investors to boost the corporate bond market.

RBI and SEBI have been mandated to work in tandem to achieve the objective of deepening of the bond market. While SEBI has been asked to introduce an electronic auction platform for primary debt offers, RBI will develop a framework for an electronic platform for repo market in corporate bonds.

Finally, both regulators have to jointly develop a complete information repository (exchange like platform) for corporate bonds, covering both primary and secondary market segments.

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