NITI Aayog lays out roadmap for India's corporate bond market
What's the story
NITI Aayog has unveiled a detailed report outlining strategies to strengthen India's corporate bond market. The report comes at a time when the bond market is witnessing strong interest and activity in 2025. Currently, India's bond market accounts for 16% of its GDP. The report recommends measures to significantly increase this by 2030 and 2047, in line with the 'Viksit Bharat' vision.
Market hurdles
Challenges hindering the growth of India's bond market
The report highlights a number of challenges hampering the growth of India's bond market. A major issue is a shallow secondary market, characterized by low liquidity and lack of price transparency. Another problem is investor concentration with an over-reliance on banks while participation from micro, small and medium enterprises (MSMEs), retail investors, and foreign portfolio investors (FPIs) remains limited.
Market challenges
Regulatory hurdles and investor constraints in bond market
The report also notes regulatory hurdles such as overlapping regulations, complex disclosure requirements, and procedural delays. It points to investor constraints where current regulations restrict institutional investment in lower-rated bonds. Additionally, weak and inefficient debt recovery mechanisms are also highlighted as major concerns affecting the growth of India's corporate bond market.
Proposed reforms
NITI Aayog's reform agenda to strengthen bond market
To address these challenges, NITI Aayog has proposed a multi-pronged reform agenda. This includes strengthening market infrastructure by creating single databases, enhancing settlement systems, and leveraging technology for market-making. The report also recommends widening the investor base through incentives and benefits especially for first-time investors. On the regulatory front, it suggests establishing unified market authorities and simplifying issuance processes to improve efficiency.
Market innovation
Innovation and legal framework strengthening in bond market
The roadmap also calls for innovative financial instruments to meet diverse investor needs and risk appetites. It stresses the need to strengthen the legal framework by improving debt recovery processes and bankruptcy resolution mechanisms. The report's timing is seen as opportune with markets expecting growth numbers could potentially double by end of 2026.