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Lack of depth and inflated margin rules are hampering corporate bond market growth

Derivatives and repo markets can certainly help the corporate bond market gain momentum as they are seen as popular hedging tools for posh buyers of corporate-backed bonds. "Furthermore, the growth and improvement of the market will continue to be a continuous train," he said. Derivatives and repo markets could help the corporate bond market gain momentum as they are seen as popular hedging tools for experienced traders in corporate bonds. "Furthermore, market development and improvements will continue to be an ongoing exercise," he said. A lack of depth in credit-rated derivatives and high-margin requirements for corporate bond repos have been obstacles to the emergence of a powerful bond market in India, RBI Deputy Governor T Rabi Sankar said.

"Efforts should focus on improving complementary markets (repos and ancillaries), diversifying the investor base both domestically and internationally, and increasing access for borrowers at the lower end of the solvency spectrum," Sankar told the chamber by Bombay Trade & Industry on Wednesday.

Derivatives and repo markets may well play a role in helping the corporate bond market gain momentum, as they are heralded as hedging-style tools for experienced buyers of corporate-backed bonds. "Beyond that, market updates and improvements will continue to be a continuous train," he said.

Diversification of the investor base and access to downside companies to improve bonds will support the development of the corporate bond market, which remains small among the major emerging Asian markets along with Malaysia, Korea and China, according to the deputy governor. of the RBI.

However, the corporate bond market has performed well, although secondary market volumes are still small.

The outstanding portfolio of corporate bonds has increased fourfold: from ₹10.51 lakh crore at the end of FY2012 to 40.20 lakh crore at the end of FY2022.

"As much as we need to take these steps, it will help us fine-tune our expectations about the level of liquidity in the secondary corporate bond markets," he said.

The lack of a risk boost for food beyond high-grade bonds is heralded as another key limitation. In 2021-22, 1,235 corporate debt instruments were allocated with points of ₹22.55 lakh crore.

The bias is much more pronounced when looking at value: 80% of issues were rated AAA by value and another 1.5% were rated AA. "While we can talk about the reasons for this trend, it is clear that the corporate bond market largely caters to the needs of highly valued companies," Sankar said. Judging from global experience, one of the best we can get could be well below the liquidity we're used to in government bond or equity markets, he added.

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