`Multiple regulators restricting corp bond market development' (Eds: Recasting headline and intro) Mumbai, Nov 8 (PTI) Presence of multiple regulatorswith disparate priorities is 'hindering' the growth of the allimportant corporate bond market (CBM) in India, a senior RBIofficial said on Friday.
The need for a robust bond market has increased,thanks to the stressed balance-sheets of banks, M RajeshwarRao, an executive director at the central bank, said.
For long, the policymakers have been struggling tomake corporate bonds a preferred fund-raising tool for IndiaInc but without much success. Despite announcing a slew ofmeasures, the bond market lacks liquidity and is barely 17percent of GDP, while in many developed economies it is muchmore than their GDPs.
Rao pointed out that the RBI could easily develop thegovernment securities market because it is the singleregulator, and it also virtually developed platforms like theClearing Corporation on which the papers are traded.
'But in the corporate bonds space we have differentregulators and we've newer institutional regulators also whowant certain prudential requirements for entities theyregulate. Perhaps, that actually hinders participation of theinstitutions in the bond market,' Rao told a CII event.
He further said apart from different regulators, thereare also different platforms like Clearing Corporation, stockexchanges, etc which are also hurting the development of thecorporate bond market.
'Since there are more players, I think thecoordination takes a bit more time,' he said.
It can be noted that every regulator, be it insurancewatchdog Irdai or the pensions regulator Pfrda have specificregulations governing their investments in bonds by theentities under their watch and don't allow investments inlow-rated companies, curbing the development of bond market.
Rao said the Financial Stability Development Counciland its sub-committee on the subject are seized of the matter,but conceded that a lasting solution will take time to evolve.
He said RBI's overall approach is to simplify regulations, andit will also not be insisting on product-specific approvals asit has done in the past.
Apart from multiple regulators, it will be essentialto resolve other concerns like supply-side issues, allowing alarger set of investors, creating a credit risk hedgingproduct and generating liquidity through the frequent tradingof bonds for popularising the corporate bonds, he said. PTI AABENKRK KRK