Budget 2018: Easing pressure on banks, FM directs companies to bond market

Finance Minister Arun Jaitley on Thursday said market regulator Securities and Exchange Board of India (Sebi) may mandate corporate houses to use bond market for one-fourth of their funding needs. "Reserve Bank of India has issued guidelines to nudge Corporates access bond market," said Jaitley while presenting the Union Budget. SEBI has already started work on the front and has set up a separate department to roll out this measure, which was part of the 2016 HR Khan committee report, on the fast track. Ajay Tyagi, current chairman of SEBI, was part of HR Khan Committee that recommended measures in the corporate bond market. Through the measure, the government wants to reduce companies' dependency on banks, and thereby reduce the pressure on the lenders who are already weighed down by NPAs. “The announcement reflects the Government’s impetus on reviving the bond market on Exchange platform,” Sanjit Prasad, MD, and CEO, Indian Commodity Exchange told Moneycontrol In the coming days, SEBI also plans to open up the corporate bond market for retail investors. Ashish Chauhan, Managing Director, Bombay Stock Exchange told Moneycontrol, “It is a positive step to build a vibrant corporate bond market in the country. We have to create other avenues also for investment and reduce the dependency on banks”. Sebi has been working to deepen the bond market. It is keen to have foreign portfolio investor (FPI) invest in unlisted corporate debt securities and wants to liberalise listing requirements and simplify disclosure norms. Though corporate bonds rated ‘BBB’ or equivalent are investment grade, most regulators in India only permit bonds with the ‘AA’ rating. "It is now time to move from ‘AA’ to ‘A’ grade ratings," said Jaitley.