MARKET UPDATES: According to an RBI official, the primary market, which has increased to Rs 40 lakh crore in a decade, should be further developed because the secondary corporate loan market's lack of liquidity is a global issue.
Addressing a Bombay Chamber of Commerce & Industry event on Wednesday, Reserve Bank deputy governor Rabi Sankar said the concerted efforts by regulators and government have seen corporate bond outstanding has crossed Rs 40 lakh crore as of March 2022 from Rs 10.4 lakh crore in March 2012, while annual issuances rose to Rs 6 lakh crore from under Rs 4 lakh crore during this period.
During the same period, the secondary market volume increased from Rs 4.4 lakh crore to Rs 14 lakh crore. Only the US has a very liquid secondary corporate bond market and India has the second best, which is very low, though the turnover ratio is 69 here. The US market is very deep because it is led by corporates and municipalities, which is a very small in the country.
But corporate bond market as percentage of GDP is also the highest at 120 in the US, while in India, it is only 18 per cent as against 80 per cent in Korea and 36 per cent in China, Sankar said. Lack of secondary market liquidity is global and not just specific to India, of course barring the US. "Our turnover ratio is 69, which is only second to the US given this we need to relook our approach to secondary market instead of focusing on the secondary market liquidity. This is primarily because of the small size of issuances which is only Rs 130 crore," Sankar said.
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