Corporate bonds to fill void as government cuts borrowing: Sebi

Bond market is developing because the govt has yielded a lot of space to the bonds

As the government has been reducing its borrowing programme, the vacuum is going to be filled by corporate bonds, a senior Sebi official said on Tuesday.

"As the Centre's borrowing programme is going to come down, the space is going to be taken over by corporate bonds," Securities and Exchange Board of India (Sebi) Member G Mahalingam said here.

"As the government is going to be more and more oriented towards fiscal rectitude, we talked a lot about political lack of homogeneity in thought. The previous government left with a fiscal target of 3.2 per cent and this government took over with the same fiscal target in mind," he said at a conference on bond market organised by Assocham.

Mahalingam said the bond market today is developing not simply only on its own but also because the government has yielded a lot of space to the bonds.

"The government was borrowing around Rs 5.80 lakh crore just a couple of years back. The government now is budgeting to borrow just about Rs 3.48 lakh crore. Where does this Rs two lakh crore space get filled up? This is where the corporate bond market has to play a very important role," said the official of India's capital markets regulator.

The Reserve Bank of India (RBI) is reducing both SLR (statutory liquidity ratio) and Held-to-Maturity Security portfolio of the bank's overall portfolio.

"All this is going to augur very well for the corporate bond market," he added.

A study prepared by CRISIL and Assocham said that despite a string of measures taken over many years, the corporate bond market in India remains shallow compared with government securities, leave alone equities.