SEBI Chairman Ajay Tyagi Highlights Need To Develop Corporate Bond Market Across The Rating Curve

SEBI Chairman Ajay Tyagi today highlighted the need to develop the corporate bond market across the rating curve and interlinking it with the government-security (G-sec) market. The corporate bond market in India is largely restricted to top rated bonds in India. Tyagi, speaking at FICCI's two-day 17th Annual Capital Market Conference stated that 97% of the bond trading happens in top rated corporate bonds -- AAA, AA-plus and AA. In the US, 75%of the corporate bond trading happens in the next three trading buckets -- A, BBB and BB.

The amount of outstanding corporate bonds in India has grown from INR 15 trillion in 2013-14 to INR 33 trillion in 2019-20 reflecting a CAGR of about 14%. Correspondingly, outstanding bank credit has grown at a CAGR of about 9% with the figures rising from INR 61 trillion to INR 104 trillion during the same period. Although, corporate bond market has seen higher growth rate over the last 5-6 years as compared to outstanding bank credit, in absolute terms it is still around one-third of the bank credit.

He noted that there is an inter-linkage between the corporate bond market and G-Sec market. Typically, the pricing of corporate bond is benchmarked to that of G-Sec of corresponding maturity. However, in India, trading in G-Secs is concentrated only in the 7-10 years' maturity bucket. There is a long way to go to have a continuous yield curve for G-Sec. This affects pricing of corporate bonds.

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