The Telegraph
Sunday , November 11 , 2012
Since 1st March, 1999
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Bid to boost corporate bond market

New Delhi, Nov. 10: A panel of financial sector regulators headed by finance minister P. Chidambaram today discussed steps required to promote the corporate bond market to help India Inc access long-term funds.

“The council discussed a number of steps to be taken for rationalising the framework for regulation of corporate debt in order to remove regulatory constraints for issuers and protect investors, encourage participation of long-term investors, reduce cost of public issuance and increase liquidity by improving the market infrastructure,” an official release said.

The corporate debt market is relatively underdeveloped mainly on account of a string of failures by private firms to pay back debt bought by retail coupon holders and use of a cumbersome company law process to reschedule debt paybacks.

The government believes a developed corporate bond market provides additional avenues to companies for raising funds in a cost-effective manner and reduces reliance on bank financing.

“Steps to improve the corporate bond market were discussed. Some decisions have been taken to improve this market,” Yogesh Agarwal, chairman of the Pension Fund and Regulatory Development Authority (PFRDA), said after the meeting of the Financial Stability and Development Council (FSDC) here.

However, Agarwal said there was no discussion on relaxing investment norms for pension funds.

The meeting also discussed the need for a road map for a structural shift towards a diverse financial system with an adequate emphasis on corporate bond instruments.

The meeting was attended by RBI governor D. Subbarao, Sebi chairman U. K. Sinha, PFRDA chairman Yogesh Agarwal and IRDA member R. K. Nair.

While reviewing the global economic situation, especially in the Eurozone and the US, the council assessed the external vulnerabilities as also the risks arising out of the same. It deliberated on various suggestions to mitigate the vulnerabilities through moderating imports, promoting exports and encouraging capital flows through progressive liberalisation, the statement added.