Tuesday, October 21, 2008

Reform the Debt Market

INDIAN policy makers have been quick to ease restrictions on foreign investments in corporate bondsas well as in government debts.
The immediate intent ofcourse is to attract more foreign debt inflows which are to some extent drying up. However, the reform of the debt market was suggested long ago to allow greater flexibility to overseas investors so that they could switch to debt when equities market faced a downtown.

The opening up of the debt market to foreign institutuional investors(FII) may have got delayed because of worries that excessive flows could impact yields of government paper may have shaped their views earlier. Also, reluctance to have foreigners holding too much of government papaer may have shaped their views earlier.


The latest changes in the debt market only need to reinforce the need to quickly refocus on building a vibrant market for private debt in India. Indian corporates are still captives to Bank Financing, especially in absence of functional bond market.

A major blame for strict defragmentation of Bond Market has been overdue to RBI which guarded this turf for time until SEBI overtook the proceedings.
In the last decade or so, Indian Market has shown up to global standards . In recent times it has developed into a good settlment and clearing system, affording decent volumes and derivatives.

Globally the Debt Market has been a counter to what was expected, but countering the global response, response on India has been somewhat overwhelming. But seeing the experts opinion this market has not favoured India to a big extent.....

There is a need for restructuring of bond market according to the need and size of the market..............

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