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Rating agency India Ratings and Research today said the issuance of a 30-year bond by the Reserve Bank is likely to resolve structural problems of corporates looking for long-term funding.
RBI has announced that it will auction a 30-year government bond on June 19.
"The new 30-year government security will fix structural issues for domestic issuers which are in need of long-term funding, especially infrastructure projects," the rating agency said in a report here today.
Infrastructure companies are typically unable to raise more than nine to 10-year funds whereas their projects generally require 20-25 years of funding.
A long-tenor government security facilitates setting a benchmark for other issuers such as banks, financial institutions and corporates to access long-term funding through capital markets.
"The benchmark issue has often been cited as a shortcoming, which prevents domestic institutions from raising much required long-term funding from capital markets," it said.
"The start of the longer dated bond issuances will bring maturity in the market and will push the market towards the longer end of the yield curve."
The report sees the benefit as a trickle-down positive for government agencies such as the Employee Provident Fund Organisation, pension funds, provident funds and life insurance companies, among others, as investors.
Corporates and infrastructure companies will be able to manage their liabilities better once longer tenured debt is made available.
