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Corporate Bond Market in India: Current Scope and Future Challenges

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  • Mukherjee, Dr. Kedar nath

Abstract

The capital market of an economy is considered to be well developed, only when a parallel development is ensured both in the equity and the debt segment. There is no doubt that the equity market in India is quite well developed and plays a crucial role in the growth of Indian economy. At the same time, Govt. debt market in India has also experienced a tremendous growth in the last decade. But unlike Govt. bonds, the corporate debt segment in India is still in the nascent stage and requires lot of initiatives to bring it to the Global standard. Bonds of different tenors issued by Central or State Governments and other PSUs capture more than 80 percent of the total debt market volume in India. Therefore, it has become very important to have a well run and liquid corporate bond market that can play a critical role in supporting economic development in India, both at the macroeconomic and microeconomic levels. Massive future growth in infrastructure, as required to achieve the higher GDP growth, can only be ensured through availability of long-term financing and also at a reasonable cost. Due to several issues, applicable to several market players, bank financing is not the right choice to meet all the financing needs to facilitate such growth. A well developed corporate bond market can be the optimal alternative, not only to support the financing requirement for infrastructural development, but also to relieve banks from all the problems of long-term financing, and spreading out the huge financing risk to a wider investor base to strengthen India’s bank-based financial system, to allow corporate borrowers to tap the low cost market, to enable investors including FIIs to earn fixed but higher returns, and above all to ensure overall growth of the economy. The present study analyze the existing structure of Indian corporate bond market, vis-à-vis the other developed markets, and attempted to explain the movements and changes taken place in Indian debt market during the last decade, may be as a result of several regulatory initiatives. The importance of an well developed corporate bond market for various groups of Indian financial sector, followed by the important factor contributing to the inferior growth of such market, supported by several facts and figures, are discussed in the study. It has been finally observed that, even if some changes have taken place to strengthen Indian corporate debt market, the market has a significant scope to contribute to the overall growth of Indian economy, but obviously subject to some very important and stringent initiatives from the Government and the concerned regulatory bodies.

Suggested Citation

  • Mukherjee, Dr. Kedar nath, 2012. "Corporate Bond Market in India: Current Scope and Future Challenges," MPRA Paper 42478, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42478
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    References listed on IDEAS

    as
    1. Joshua Felman & Simon Gray & Mangal Goswami & Andreas A. Jobst & Mahmood Pradhan & Shanaka Peiris & Dulani Seneviratne, 2014. "ASEAN-5 bond market development: Where does it stand? Where is it going?," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 28(1), pages 60-75, May.
    2. Jacob Gyntelberg & Guonan Ma & Eli M Remolona, 2005. "Corporate bond markets in Asia," BIS Quarterly Review, Bank for International Settlements, December.
    3. Marco Pagano, 2004. "The European Bond Markets under EMU," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 20(4), pages 531-554, Winter.
    4. Muhammad bin Ibrahim & Adrian Wong, 2006. "The corporate bond market in Malaysia," BIS Papers chapters, in: Bank for International Settlements (ed.), Developing corporate bond markets in Asia, volume 26, pages 114-28, Bank for International Settlements.
    5. V K Sharma & Chandan Sinha, 2006. "The corporate debt market in India," BIS Papers chapters, in: Bank for International Settlements (ed.), Developing corporate bond markets in Asia, volume 26, pages 80-87, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Bond Market; Corporate Bond; India; Secondary Market;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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