While the Securities and Exchange Board of India (SEBI) has made it mandatory for corporates to meet 25% of their financing needs from the bond market, a nudge from the insurance and pension regulators could bring in more investors and liquidity in the bond market, said SEBI whole-time member G. Mahalingam.
“Developing the bond market will require a concerted effort from regulators across segments such as insurance and pension funds apart from the SEBI,” he said at the annual capital market conference organised by FICCI.
A constant dialogue was on between the SEBI, the Insurance Regulatory and Development Authority (IRDA) and the Pension Fund Regulatory and Development Authority (PFRDA) on this matter, he added.
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Stating that the capital market watchdog had already allowed mutual funds to invest in bonds with BB rating, he said that the IRDA and PFRDA should also allow their regulated entities to invest in such instruments.
“If they are able to get their regulated entities into slightly lower graded assets, the investor universe will open up in a very big way,” said Mr. Mahalingam.
Banks and insurance players had long-term liabilities in the balance sheet and so they were well positioned to invest in long-term assets, he noted. Banks could not go on financing corporates, and, hence, the bond market would have to share the load, Mr. Mahalingam added.
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