Stressing on the importance of creating an ecosystem that promotes and nurtures the bond market, a SEBI official said here on Tuesday that the reduction in the government’s borrowings programme as announced in the Budget augurs well for the bond market.
“This decision has yielded a lot of space to bonds,” G. Mahalingam, whole-time member SEBI said, at a conference here. “A broad consensus is emerging on reduced government borrowings and a ₹2 lakh crore gap is there between the ₹5.8 lakh crore borrowing by the earlier government and the ₹3.8 lakh crore budgeted by this government .. this space will be taken over by corporate bonds.”
The SEBI member said traditionally in India, government securities had been treated as the only high quality liquid asset (HQLA). “Over a period of time corporate bonds will be treated as HQLA and the amount of bonds being raised is now surpassing bank credit, he said. “The bond market is growing slowly and steadily.”
“It is everyone’s duty, including the regulators, to see that the secondary bond market becomes vibrant like the equities market,” he said. Sector experts said in this context that the multiple layers involved in bond-trading makes the process difficult, posing liquidity problems for the investor.
Samar Banwat, executive vice-president, NSDL said that the debt market, particularly corporate debt market has grown well over the last five years. He explained later since investors were hungry for instruments, corporate bonds could very well fill the gap created by lower government borrowings.
