r gandhi : corporate debt market : what needs to be done – a reaffirmation inaugural address by mr r gandhi, deputy governor of the reserve bank of india, at the “ care ratings debt market summit – 2015 ”, mumbai, 23 march 2015. * * * assistance provided by ms anupam sonal is gratefully acknowledged. good morning ladies and gentlemen! 2. i would like to thank care ratings for taking this initiative of holding this summit on the corporate debt market. as i can see, the seminar is quite exhaustive in content and we will be having some excellent speakers representing various segments of the industry and hence it will be very interesting to hear their views. as a regulator, we in the reserve bank do have our own approach to the development of any market, but to hear the market participants is always important for us as it is only when we debate the issues that we can come to a workable solution. i am sure that we will have a lot to pick up from these deliberations that take place here today. corporate bond market in india – current status 3. indian corporate debt market has seen some growth in recent years, both in terms of number of issues and amount. the outstanding issues which were at 12, 155 as at end march 2011 increased to 18, 664 by end dec 2014. during the same period, the amount outstanding increased from ₹ 8, 895 billion to ₹ 16, 485 billion. while the types issued included fixed rate bonds, floating rate bonds, structured notes and other types, the fixed rate bonds were predominant both in number and value. another characteristic of the issuances was that almost all issuances were by financial sector entities. yet another peculiar feature of our corporate bond market is that private placements are the norm. the public issuances which were ₹ 94. 51 billion in 2010 – 11 increased to ₹ 423. 83 billion in 2013 – 14, though it fell back to ₹ 90. 49 billion in the current year till feb 2015. the private placements were ₹ 2187. 85 billion in 2010 – 11, ₹ 2612. 82 billion in 2011 – 12, ₹ 3614. 62 billion in 2012 – 13, ₹ 2760. 54 billion in 2013 – 14 and ₹ 2692. 45 billion in the current year till dec 2014. the secondary market trading was ₹ 6053 billion in 2010 – 11, ₹ 5938 billion in 2011 – 12, ₹ 7386 billion in 2012

from corporate bonds and government securities, from 31. 5. 2015 to 30. 06. 2017. g ) credit enhancement by iifcl : it has been mentioned in the union budget 2013 – 14 that iifcl will provide partial credit guarantee to enhance ratings of bond issues, enabling bis central bankers ’ speeches channelization of long - term funds for infrastructure projects. iifcl is presently undertaking pilot transactions under its credit enhancement initiative. h ) introduction of rupee linked offshore bonds by international finance corporation ( ifc ) : with an objective to signal confidence in the indian economy and encourage inflows of usd in india, ifc was permitted to float a rupee linked bond overseas for an amount of usd 1 billion. ifc received very good response and the limit has been fully utilized by ifc. i ) domestic issuance of bonds by ifc : approval has also been given to ifc to issue bonds in india worth ₹ 15000 crore for infrastructure financing. this will also facilitate development of benchmark yield for long term corporate bonds. way forward 17. going forward, we expect a special impetus to the growth of corporate debt market in our guidance to the banks to issue long term bonds to support infrastructure and housing projects. further, in order to meet the capital requirements under the basel iii framework, banks will tap the market with their additional tier 1 bonds, besides tier 2 bonds. these developments can usher in emergence of quasi government yield curve, which can serve as benchmark for corporate issuances. when the basel 3 framework relating to large exposure norms take effect, and as banks reach their limits in supporting direct lending to the corporate sector, corporates be nudged to resort to market borrowing. on top of this, the expected robust economic growth will also compel the corporate sector to approach the market. keeping all these in perspective, we need to ready ourselves with the following measures to usher in a vibrant corporate debt market : a ) regulatory and administrative reforms to institutionalize debt markets, b ) involvement of market - makers who can provide two - way bid - ask quotes, c ) enhancement of investor base, d ) increasing the efficiency of these markets through better reporting, settlement and clearing platforms, e ) emphasis on the reduction of information asymmetry. conclusion 18. to conclude, the debt markets is undoubtedly a very essential segment of the country ’ s financial markets and vibrancy in these markets is imperative to meeting the massive funding requirements of the country. i am confident that this conference