Radhika Pandey & Bhargavi Zaveri: Time to inflate economy's 'spare tyre'

There are no maturity-driven restrictions on the bonds that Indian residents may invest in. The same principle must be applied to foreign portfolio investors in rupee-denominated debt

Bhargavi Zaveri & Radhika Pandey

The Budget Speech of 2016 underscored the need to shift from bank lending to market-based lending. It promised that "the RBI (Reserve Bank of India) will issue guidelines to encourage large borrowers to access a certain portion of their financing needs through market mechanism instead of the banks". The promise implicitly recognises the need to now inflate the proverbial "spare tyre" of the economy. While development of a corporate bond market in India requires comprehensive regulatory reform, two immediate reforms are possible in this area. First, the ban on foreign ...