CAPITAL market regulator Securities & Exchange Board of India (Sebi) has said that it will facilitate exchange trading in corporate bonds soon. Creating a framework for corporate bond trading is believed to be essential for developers of utilities such as roads, ports and power projects to raise low-cost funds that can be repaid over a long term.
“We are looking at an exchange-traded corporate bond market, because there is more transparency there and manipulations are not possible,” Sebi wholetime member T C Nair said here after releasing a study on derivatives by industry body Assocham on Monday. Infrastructure developers believe that a viable business model and a transparent corporate bond market will be useful in attracting investors with medium risk appetite to invest in their long-term bonds. Today, most of the trade in corporate bonds happens bilaterally. Corporate bonds worth Rs 300-400 crore are traded daily in the bond market,” Mr Nair added. The regulator is waiting for state governments to agree on a uniform stamp duty rate for such bonds, he added.
Sebi is in the final stages of putting in place the system, which is expected to become operational in a couple of months. Mr Nair said this would also help them raise funds at competitive rates. Public sector India Infrastructure Finance Co chairman S S Kohli said the corporate debt market is going to be the main source of investing in infrastructure. India needs $500-billion investment in the infrastructure sector in the five-year period ending March 2012 with significant private participation, but the recent global credit crisis has dried up funds abroad.
Sebi will also allow exchange-traded interest rate futures in January. “We are on track to launch interest rate futures by January,” Dr Nair said. In response to Assocham’s recommendation for a separate exchange for derivatives trading, Mr Nair said it could be a possibility, which can happen after the Indian system has fully comprehended the implications of derivatives. A decision has to be taken by Sebi, RBI and the government.
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