In order to develop a vibrant corporate bond market, the union finance ministry is reportedly planning some steps in collaboration with Reserve Bank of India (RBI) and the ministry of corporate affairs (MCA).
Media reports suggest that the ministry plans to give
statutory liquidity ratio (SLR) status to corporate bonds in order to encourage banks to invest in them.
SLR, which currently stands at 23 per cent, is the minimum mandatory investment by banks in government securities.
If their investment in AAA-rated corporate bonds is counted towards SLR, as proposed by the finance ministry, banks will get that much more room to invest in private sector debt, encouraging blue chip companies to come out with more issues.
Further, the ministry is also reportedly planning to
reduce the amount of funds that companies have to keep aside every year to redeem debentures issued.
This may encourage companies to raise funds through debentures, which accounted for lowly 3.9 per cent of their funds needs in 2010-11.
The finance ministry has also initiated talks with corporate affairs ministry for changes in the companies act to cut debenture redemption reserve, funds they have to keep aside funds every year from their profits to build up a corpus to redeem debentures.