RBI to soon take steps to boost bond trading: FM Nirmala Sitharaman

Finance Minister Nirmala Sitharaman on Friday said the government will soon take further action to develop the credit default swaps (CDS) markets in India, and will ask the Reserve Bank of India (RBI) to initiate measures to increased trading in the bond market further.

In order to improve access to long-term finance, the government would be setting up an organisation to provide credit enhancement for infrastructure and housing projects. This would enable better debt flow in the segment. 

Although the minister did not elaborate on what measures could be taken to boost the bond market trading, bond dealers said increasing more participation of foreign money in the debt market could be a possible option. Besides, the credit guarantee on infrastructure could help the space.

“In the short-term, banks’ credit enhancement schemes can help. But the CDS is unlikely to gain popularity anytime soon. Except for a few foreign banks, nobody is comfortable with that instrument,” said a senior bond dealer with a bond underwriter.