SEBI working on a framework to attract retail investors and encourage more exchange-traded funds in debt securities: Ananta Barua

SEBI is looking at implementing a framework to encourage more exchange-traded funds in debt securities to increase retail investors’ interest in the market. The regulator wants to replicate the story as seen in the equity segment, where the ETFs and index funds have deepened retail investors’ participation in the markets, says Ananta Barua, Whole-Time Member, Securities and Exchange Board (SEBI).

SEBI is also looking at implementing other measures as announced in the annual budget by Finance Minister Nirmala Sitharaman said Barua.

The Bond Market Committee has become extremely important now. In 2008, there was only one issuance of 8,000 crore which has now grown to 7,50,000 crore. The total issuance of Bond Market to GDP is 16%. The SEBI has set up the Limited Purpose Clearing Corporation to undertake the activity of clearing and settlement of repo transaction, which will help in the development of the Bond Market, Barua added.

Expressing satisfaction with the bond market, Barua said, the total issuances came at over 16% of the GDP last fiscal from a slow start. He said the overall outstanding bonds had stood at Rs 40.17 lakh crore at the end of FY22 against Rs 36 lakh crore in the year ago period. In 2008, we came out with first regulations for Corporate Bonds. We have laid down a road map for all kinds of debt. The US is so developed due to well-entrenched Municipal Bond market, and I was told it is under REITs. Then I compared how development has taken place in US and how we can do it in India? We need similar initiatives for our infrastructure growth. We have already laid the road map and are coming up with new regulations to protect investors as well as promote growth.

Associated Chambers of Commerce and Industry of India (ASSOCHAM) along with Bombay Stock Exchange (BSE) also released a comprehensive knowledge paper “Next Generations Reforms for Alternative Funding” on Corporate Bond Market in a bid to enhance investor interest for Corporate Bonds. A well-developed Corporate Bond Market supports economic development and the role of the bond market is indispensable to mitigating financial crises and enhancing the financial stability of the country.

Bond markets are most suited for long and ultra-long-term financing to pave the way for India’s infrastructure growth path. In the last five years, India has been providing a boost to infrastructure development by streaming the regulatory framework, opening up investment avenues and implementing an effective policy coupled with faster decision making.

ASSOCHAM meet reminded that the success of any sector depends on the implementation of the policies that support its functioning. The credit requirements of the corporate sector have to be addressed timely and efficiently as India is fast becoming a global economic powerhouse. The debt market plays a vital role in shaping the economy benefiting issuers, investors and regulators/environment.

Ms Nipa ShethChairperson, ASSOCHAM National Council for Corporate Bond Market and Founder & MD, Trust Group, said “As the size of the Indian debt market increases along with the domestic economy, the ASSOCHAM Bond Summit focuses this year on reforms needed to facilitate alternative sources of funding. Innovative instruments like REITs and INVITs have enabled corporates raise substantial amounts of capital in an investor friendly manner.”

While the Government of India has enhanced its focus on segments like Roads, Renewables and Power Transmission, with record levels of project execution and prudent financing framework, it has emerged as a preferred investment destination among emerging markets for bond investors looking for low risk, long-term consistent returns.

Emphasising on the need to focus on Corporate Bond Markets, Shri Ashish Kumar Chauhan, MD & CEO, BSE India, said, “The concept of debt brings lot of memories. We use debt not only commercially but also in social functions. Debt capital market in India is going to perform well. We need to recognise, reward and highlight accomplishments. Debt has a huge role to play. Since 2015, Rs 8,554 crores worth of green bonds have been raised on the BSE debt platform with an average coupon rate of 8.08%.”

Due to high inflation, the Government is tightening the money supply and in next few months it is going to be very tough for overall interest rate markets, Chauhan added.

According to Aditi Mittal, Co-Chairperson, ASSOCHAM National Council for Corporate Bond Market and Director, A K Capital Services Ltd, the bond markets in India have seen gradual development since 1991. The markets have however, matured significantly in the last few years providing a relatively safe investment avenue to investors. The Indian Corporate bonds outstanding grew at 14.34% CAGR from Rs 10.52 lakhs crore in March 2012 to an amount of Rs 40.17 lakh crores as of march 2022. Consistent growth in markets over the years highlights the increasing reliance of bond markets to fund corporate activity.

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