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PCE facility success depends on investor appetite, market reforms

The facility aims to bridge the gap for lower-rated corporate bonds

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Anjali KumariSubrata Panda Mumbai

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Lower-rated companies are likely to improve ratings on their bonds owing to the Partial Credit Enhancement (PCE) Facility, announced in this year’s Union Budget, making them more appealing to institutional investors such as insurance companies,
mutual funds, and pension funds, which typically invest in bonds rated AA and above. However, market participants have sounded caution, saying the success of the product depends on structural adjustment and market reform. 
Union Finance Minister Nirmala Sitharaman last week said the National Bank for Financing Infrastructure and Development (NaBFID) would set up a credit enhancement facility for corporate bonds for infrastructure. 
According to market participants,

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