Regulators must open up space in a bigger way to develop vibrant debt market in India in 3 yrs: SEBI official

The financial regulators have to open up their space in a bigger way for developing a vibrant debt market in India in the next three years, a top Securities Exchange Board of India (SEBI) official said at an ASSOCHAM event.

It must be seen whether regulators like IRDA (Insurance Regulatory and Development Authority), PFRDA (Pension Fund Regulatory and Development Authority) have created that kind of a bandwidth for the insurance companies, for the pension funds, provident funds to invest in the bond market, said Mr G. Mahalingam while addressing an ASSOCHAM National Conference on Bond Market.

He said that on an average, the portfolio return cannot be more than 200-300 basis points in corporate bonds and it is important for people to understand this reality and it is not practical to earn a return which is double-triple of the bank deposits.

He said that it is important for the people to realise that bond markets are growing, more so as bond markets growth this year has out-stripped the bank credit growth, which is quite surprising, as nothing of this sort had happened in the past.

He informed that bank deposit growth this year is almost close to about 10 per cent, the bank deposits are standing at Rs 105 lakh crores. While the bank credit has grown by an abysmal 4.8 per cent this year and it is at around Rs 73 lakh crores, so looking at correspondingly at the bond market, it can be seen that it has really grown by leaps and bounds.

Talking about the initiatives taken by the government with a view to boost the corporate bond markets in India, Mr Mahalingam informed that the insolvency regime is finally in place, besides the enablers have also been put in place so today there is no reason why people should feel sceptical about investments in bonds.

Further he said that government's borrowing budget in the current year has come down by almost Rs two lakh crore which is going to be a great enabler for the corporate bonds to come into the picture.

He said that the government is actually vacating the huge amount of space which is developing so automatically and thus the corporate bond scenario is going to grow in a very robust way.

The SEBI Whole Time Member also said that people should be allowed to move around freely from one segment to another segment with free connectivity as that would create and open up the entire market in a robust manner which could not be imagined.

If we can open up this connectivity, if the banks can play a role in the exchange traded platform segment, we are going to have a bond market where perhaps the liquidity will go unchallenged and perhaps match the liquidity levels in the US, said Mr Mahalingam.

He further said that infusing some amount of secondary market liquidity can help attract retail investors to enter the corporate bonds' space.

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