Sebi chief moots BRICS bond market

Mumbai: Sebi chairman U K Sinha on Tuesday floated the idea of a bond market for the BRICS group of nations that could play a complementary role to the bloc’s development bank, rechristened New Development Bank. He was giving the inaugural address at a conference of top banking and finance officials from BRICS nations, arranged by the ministry of finance and industry trade body CII.Sinha also called on the BRICS officials to discuss the challenges they face in developing the bond market in their respective countries and share their experience to overcome such hurdles in other countries.
Sinha said that a lot of developments have taken place in the corporate bond market in the last few years, but there was scope for further deepening of this segment of the financial market. He said that one of the major operational issues in this market is the non-uniform stamp duty rates across states. “Discussions are on to have a uniform rate,” he said.
The Sebi chief also said that differentiated regulatory moves, when companies tap banks for loans and when they access the corporate bond market, have been one of the hurdles in developing the bond market in India. For example, he said that when a company opts for cash credit or overdraft facility from a bank, it becomes a private deal. In comparison, when the same company taps the bond market for funds and even if the same bank buys those banks, the company is required to disclose a lot of information to the public. He also cited the case of valuation of corporate bonds, which is done on a mark-to-market basis, whereas there is no such provision when the same company takes a bank loan.
Sinha pointed out that regulators are working towards neutralising the limitations which exist in the bond market. He said that one of the most important changes in the lending space brought in by the RBI in recent times was the disincentives for large borrowers when they tapped banks for funds. The current regulator thinking is to force large borrowers to tap the corporate bond market for funds and not depend only on banks for funds, he said.
Sinha also mentioned that recent developments like a dedicated platform for trading in corporate debt, repository of bonds, regulation for the development of municipal bonds, and the bankruptcy code that protects bond investors helped remove some of the major hurdles in deepening the bond market in India.
During his media interaction after the inaugural address, Sinha said that allowing FPIs to trade directly in the equity market was not on the regulator’s agenda. Recently, FPIs were allowed to trade directly in the corporate debt segment of the market. He also said that Sebi’s technical advisory committee will deliberate and take a view on rules for high frequency trading/algorithm-based trading.