Hyderabad, May 6: The Indian government today said it is working with the Asian Development Bank to develop a pan-Asian bond market and as a prerequisite to it, it would help deepen the Indian corporate debt market.

“Discussions are on with ADB to create a pan-Asian bond market ? but as a prerequisite we have to develop our own corporate debt market,” finance minister P. Chidambaram said here today.

The government is likely to allow repo sales of corporate debt paper as part of a package of measures based on the R.H. Patil Committee report to develop the local bond market.

India and other Asian nations hope that an Asian bond market would channelise the surplus funds with Asian oil producing nations, China and Japan, into investments within Asia. India is keen that a generous chunk of the bonds raised come to India .

“At present, a large portion of Asia’s surplus funds are invested in the US and European markets ? we want a part of it, perhaps half of it, to be invested within Asia,” said Chidambaram.

ADB president Haruhiko Kuroda supported Chidambaram on the bond market issue. “We have been pro-active in developing the Asian bond market and will continue to promote it. This could be an important step to reduce global imbalances.”

ADB wants to develop the bond market in such a manner that Asian financial institutions issuing bonds can meet their financing requirements and help create an asset-backed securities markets, including collateralised debt obligations.

It has already started issuing local currency bonds, including rupee denominated bonds, in a bid to further the case for the common Asian bond market.

Asian fund surpluses, along with huge deficits run up by the US and rising oil prices, are considered responsible for volatile global fund flows and currency movements, which many feel could send the global economy into a tailspin.

Most finance ministers who attended the four-day ADB meet have voiced fears that rising crude prices could destroy their economic prosperity.

Chidambaram said, “I too am worried about oil prices ? I do not see any international mechanism developing to check oil price rise.”

“I don’t see any immediate impact on GDP growth prospects but it could have an impact on inflation levels,” he added.

The finance minister also said the growing web of free trade pacts that the government was working on with China, Japan and Korea should not worry Indian companies. “I am confident a carefully framed FTA will bring benefits ? we will be selective and careful in the way the pacts are drafted,” Chidambaram said.