Challenges
- Few corporate entities meet transparency and governance standards.
- This creates a gap between demand and supply of corporate bonds.
- Public offering of bonds is expensive and time-consuming.
- Corporates find it easier to borrow from banks or use private placement.
- Non-availability of bankruptcy laws (historically) hindered investor protection.
- Building required infrastructure for the market is costly and time-consuming.
Solutions
- Government has raised Foreign Portfolio Investors (FPI) ceiling limit to 15% in corporate bonds.
- Government is framing an investor charter for rights, responsibilities, and grievance redressal.
- Creation of a ‘backstop facility’ to purchase investment-grade bond/debt papers.
- This facility would operate in both stressed and normal times.