The capital markets regulator is working on several proposals to strengthen the corporate and municipal bond markets in India, according to three people familiar with the development.
These steps include allowing greater flexibility in using corporate bonds as collateral to borrow and encouraging local bodies to sell bonds to the public by putting in place bankruptcy procedures, they said, requesting anonymity.
The Securities and Exchange Board of India’s (Sebi’s) attempt to deepen the corporate and municipal bond markets will help companies and local bodies raise capital from the public, reducing their reliance on banks, which have become risk-averse because of rising bad loans.
The cost of borrowing in the bond markets has fallen faster than bank lending rates, potentially making it more attractive for companies to raise funds from the markets.
