Description
A study of the investment norms for banks, insurance companies, pension funds, and provident funds helps to understand specifics of the investment bottlenecks that may have prevented the development of a well-functioning corporate debt market in India. According to the eligible Statutory Liquidity Ratio (SLR) investments (as per Master Circular – Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) issued on July 01, 2011), banks are required to hold 24% of their liabilities in cash, gold, central and state government investments, thereby leaving non-government bond market instruments completely out of the picture.
Indian Bond Markets
Assessment and Prospects
H R Khan
Reserve Bank of India
FIMMDA Network Event, September 1,
!"1"
#penin$ %&o'$&ts
• Importance of bond markets
• (overnment Bond Market
– Provides a risk)free *ie+d c'rve
– ,i-'id, deep, and broad)based market necessar* to faci+itate
optima+ $overnment borrowin$
• .orporate Bond market
– Providin$ corporate sector a /nancin$ aven'e comp+ementar* to
bank /nance
– Promote /nancia+ stabi+it*
• %wo decades of market reform
– .overed a +ot of $ro'nd b't a +ot sti++ to be done
• %imes &ave never been more interestin$
• (+oba+ .risis is an opport'nit* to +ook back and re0ect on t&e
road trave++ed
• ,ook at t&e iss'es in a S1#% framework
GOVERNMENT SECURITIES
MARKET (GSM)
(SM) Stren$t&s 213
•
,ar$e s'pp+* of sec'rities
–
Enab+in$ creation of benc&mark sec'rities
wit& s'4cient o'tstandin$ stock
•
Iss'ances across t&e *ie+d c'rve
•
5State of t&e Art6 primar* iss'ance process
–
E+ectronic biddin$
–
Faster processin$
–
F+e7ibi+it* to dispose of sec'rities on t&e same
da*
(SM)Stren$t&s 2!3
•
1e++ capita+ised and e4cient Primar* Dea+er
S*stem
– .RAR 8 19:, m'c& above t&e Base+ norms
– 1"": of t&e noti/ed amo'nt 'nderwritten
•
So'nd Depositor* s*stem
– Proprietar* and c'stodia+ acco'nts
– .omp+ete demateria+i;ation
•
5State of t&e Art6 market infrastr'ct're
– Mandator* reportin$
A study of the investment norms for banks, insurance companies, pension funds, and provident funds helps to understand specifics of the investment bottlenecks that may have prevented the development of a well-functioning corporate debt market in India. According to the eligible Statutory Liquidity Ratio (SLR) investments (as per Master Circular – Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) issued on July 01, 2011), banks are required to hold 24% of their liabilities in cash, gold, central and state government investments, thereby leaving non-government bond market instruments completely out of the picture.
Indian Bond Markets
Assessment and Prospects
H R Khan
Reserve Bank of India
FIMMDA Network Event, September 1,
!"1"
#penin$ %&o'$&ts
• Importance of bond markets
• (overnment Bond Market
– Provides a risk)free *ie+d c'rve
– ,i-'id, deep, and broad)based market necessar* to faci+itate
optima+ $overnment borrowin$
• .orporate Bond market
– Providin$ corporate sector a /nancin$ aven'e comp+ementar* to
bank /nance
– Promote /nancia+ stabi+it*
• %wo decades of market reform
– .overed a +ot of $ro'nd b't a +ot sti++ to be done
• %imes &ave never been more interestin$
• (+oba+ .risis is an opport'nit* to +ook back and re0ect on t&e
road trave++ed
• ,ook at t&e iss'es in a S1#% framework
GOVERNMENT SECURITIES
MARKET (GSM)
(SM) Stren$t&s 213
•
,ar$e s'pp+* of sec'rities
–
Enab+in$ creation of benc&mark sec'rities
wit& s'4cient o'tstandin$ stock
•
Iss'ances across t&e *ie+d c'rve
•
5State of t&e Art6 primar* iss'ance process
–
E+ectronic biddin$
–
Faster processin$
–
F+e7ibi+it* to dispose of sec'rities on t&e same
da*
(SM)Stren$t&s 2!3
•
1e++ capita+ised and e4cient Primar* Dea+er
S*stem
– .RAR 8 19:, m'c& above t&e Base+ norms
– 1"": of t&e noti/ed amo'nt 'nderwritten
•
So'nd Depositor* s*stem
– Proprietar* and c'stodia+ acco'nts
– .omp+ete demateria+i;ation
•
5State of t&e Art6 market infrastr'ct're
– Mandator* reportin$