ZEE Business
ZEE BUSINESS
हिंदी में पढ़ें  हिंदी में पढ़ें
Live TV
Live TV
  • Home
  • Personal Finance
  • Adani Saga
  • Markets
    • Stocks
    • Global Markets
    • IPO
    • Companies
    • Currency
    • Commodities
  • My Money
  • Calculators
    • Income Tax Calculator
    • Home Loan/EMI Calculator
    • Mutual Fund Returns Calculator
    • Personal Loan Calculator
    • Car Loan Calculator
    • SIP calculator
    • Lumpsum Calculator
    • SWP Calculator
  • Videos
    • M Se Market
    • Jeb Zindagi Zaroorat
    • Light Camera Stocks
    • Tech Takes
    • Big Bulls Ka Nishana
    • Paisa Wasool
    • Commodity Ke MrityunjayMantra
    • The Right Property Show
  • Economy & Infra
    • Policy & Initiatives
    • Agriculture
    • Telecom
    • Aviation
    • Railways
    • Retail
    • Roadways
    • World Economy
  • Exclusive
    • Wealth Guide
    • Interviews
  • Auto
    • Cars
    • Bikes
    • Electric Vehicle
    • Commercial Vehicles
  • Tech
    • Mobiles
    • Gadgets
    • Reviews
    • Tips and Tricks
    • Apps
  • Real Estate
    • Home Buyers
    • Builders
  • Axis MF
  • Trending
    • Entertainment
    • Politics
    • Lifestyle
    • Travel
    • Sports
    • Viral
    • Education
    • Jobs
Read in App
Business News » India News

Indian corporate bonds nowhere near perfection

The Reserve Bank of India, in a recent working group paper on corporate bonds said that the bond market "complements a sound banking system as an alternate source of finance to the real sector for its long term needs. These bonds support in diversification of risks in the financial system."

  • Twitter
  • Facebook
  • Linkedin
  • whatapp
  • View in App
Indian corporate bonds nowhere near perfection
In 2014 - 15, corporate bond issuance was up 236% from 1.74 lakh crore seen in the 2008-09 recession year to Rs 4.14 lakh crore. Photo: Pixabay

The government, market regulator and the central bank are pushing companies to take to corporate bonds. 

The results are out -- in 2014 - 15, corporate bond issuance was up 236% from 1.74 lakh crore seen in the 2008-09 recession year to Rs 4.14 lakh crore.  

The Reserve Bank of India, in a recent working group paper on corporate bonds said that the bond market "complements a sound banking system as an alternate source of finance to the real sector for its long term needs. These bonds support in diversification of risks in the financial system."

In the same paper, the RBI put forth issuses that still persist with corporate bonds.  

 The RBI, Securities and Exchange Board of India (Sebi) and the government have identified areas in the corporate bond market that needs tweaking. These issues are keeping the corporate bond market from deepening. 

There are ten issues put forth by the RBI working paper that current persist in the corporate bonds market. 

1. The corporate bond issuance is dominated by private placements as these account for more than 95% of the total issuance of corporate debt (2014-15);

2. A majority of the issuances are concentrated in the 2-5 year tenor;

3. The investor base is limited/narrow as the investment mandates of institutional investors such as insurance companies, pension funds and provident funds, despite review of the minimum credit rating from time to time, provide      limited space for going down the credit curve as the investments are made in fiduciary capacity to protect the interests of subscribers;

4. Small outstanding stock of individual issuances is one of the key factors impacting secondary market trading as reissuances have not picked up inspite of the enabling provisions by Sebi;

5. Functional trading platform with Central Counter Party (CCP) facility like NDS-OM in G-Sec is not available; the existing DvP-III settlement introduced by stock exchanges has found no takers;

6. There is total lack of liquidity in credit risk protection instruments like Credit Default Swaps (CDS);

7. Stamp duties on corporate bonds across various states have not been standardised; tax regime for financial instruments remains one of the key drivers of investor interest;

8. There are inherent structural incentives for borrowers to prefer bank financing, e.g., cash credit system and no disincentive for enjoying unutilised working capital limits;

9. As the corporate debt market cannot be looked as totally detached from the sovereign bond market, this market may get a fillip as the interest rates come down with the inflation and fiscal consolidation targets being achieved;     and

10. In the current context, many large non-financial corporates who should normally be the preferred issuers of bonds are leveraged and hence cannot access either loan from banks or bond financing through market mechanism.

Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.

TAGS:
corporate bondsReserve Bank of India (RBI)InvestmentBanking & Financial ServicesEconomySecurities and Exchange Board of India (Sebi)
Written By: ZeeBiz WebTeam
Updated: Wed, Aug 24, 2016
01:16 pm
Mumbai , ZeeBiz WebDesk
RELATED NEWS
Sebi approves future contracts on corporate bond indices Sebi approves future contracts on corporate bond indices
Rising interest rates to mute corporate bond issuance by 4-5% in the current fiscal – know what this report says Rising interest rates to mute corporate bond issuance by 4-5% in the current fiscal – know what this report says
HDFC Bank to raise Rs 50,000 cr via bonds; re-appoints Renu Karnad as director HDFC Bank to raise Rs 50,000 cr via bonds; re-appoints Renu Karnad as director
Fund raising via debt placement touches 6-year low at Rs 5.88 lakh cr in FY22 mainly due to these two reasons Fund raising via debt placement touches 6-year low at Rs 5.88 lakh cr in FY22 mainly due to these two reasons
Sebi overhauls advisory committees on secondary markets, mutual funds, corporate bonds Sebi overhauls advisory committees on secondary markets, mutual funds, corporate bonds

LATEST NEWS

Happy Chaiti Chhath Puja 2023 Wishes: The four-day festival starts today

Avalon Technologies IPO to be launched on April 3: 10 things to know before subscription opens

Experts believe proposals in Finance Bill on debt mutual funds and securities transaction tax may adversely impact market

Income tax: What are the 6 common tax-saving mistakes that can be avoided

NPS vs OPS: Govt to set up panel to improve new pension scheme to take care of employees’ concerns

ChatGPT bug may have exposed payment information of some users: OpenAI

Vivo V27 5G first impression: Design, display and camera features

Twitter Blue subscription users may hide their paid check marks soon

Maruti Suzuki targets sales via Nexa outlets to overtake volumes of Hyundai, Tata Motors by next year

March F&O expiry, global cues, and FII flows among other factors for Dalal Street in holiday-shortened next week

  • India News
  • World News
  • Companies News
  • Market News
  • Personal Finance News
  • Technology News
  • Automobile News
  • Small Business News
  • Income Tax Calculator
  • Live TV
  • Videos
  • Photos
  • Author
  • Rss Feed
  • Advertise with us
  • Privacy Policy
  • Legal Disclaimer

Latest Trending Updates

  • EPFO
  • Budget 2020
  • Income Tax Return
  • Auto Expo 2020
  • Home Loan
  • Business News

Trending Topics

  • Income Tax
  • income Tax Calculator
  • 7th Pay Commission
  • Reserve Bank of India
  • GST
  • Latest Business News

Follow us on

zeebiz
zeebiz

Partner Sites

  • Zee News
  • Hindi News
  • Marathi News
  • Bengali News
  • Tamil News
  • Malayalam News
  • Gujarati News
  • Telugu News
  • Kannada News
  • DNA
  • WION
© 2023. Indiadotcom Digital Private Limited. All Rights Reserved.
LIVE TV