ISBN - 978-93-81583-46-3 

Role of Indian Corporate Bond Market on Sustainable Business: Emerging Challenges and Issues
Khushboo Agnihotri Amity University, Uttar Pradesh

National Conference on Emerging Challenges for Sustainable Business 2012  273 

The financial support needed by a business for its expansion can be met by raising funds through various instruments of stock market such as shares. mutual funds and initial public offerings. credit rating. in order to successfully expand and grow its business on a sustained basis. The study would also include a discussion on industries that need to be prioritised while allocating finances by the financial markets or institutions. In this regard. the complementary nature of bank financing and direct financing by the corporate debt market in financing corporates is desirable. increase in profits and increase in assets. The research paper includes a study on the issues and challenges facing the corporate bond market in promoting sustainable business which affect the business environment. Factors that limit the development of corporate bond market in India will also be reviewed along with the measures to overcome the constraints. The study covers the role of finance in the process of sustainability in general and of corporate bond market in particular. The private corporate bond market provides an alternative means of long-term finance (alternative to financing by banks and financial institutions) to corporates. The key to all expansion plans of a business involves evaluating the company's strengths and weaknesses in the light of the various business risks that it may have to face. sustainability reflects the ability of a firm to earn higher profits and compete with the rivals in an effective manner.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues ROLE OF INDIAN CORPORATE BOND MARKET IN A SUSTAINABLE BUSINESS: EMERGING CHALLENGES AND ISSUES Abstract Sustainable business is any organisation that conducts its business activities to ensure that all processes.1 Introduction Growth of a business is essential for sustaining its viability. must take into account the basic regulatory requirements of the country. It can also raise capital by ploughing back its profits and through public deposits. These growth objectives can be achieved by a business by expanding the existing market for its product and entering into new markets for which they require finances. dynamism and valueenhancing capability. products and manufacturing activities adequately addresses the current business issues and concerns while maintaining a profit. Moreover. an entrepreneur. private placement   1. National Conference on Emerging Challenges for Sustainable Business 2012  274  . The three widely used measures of business/corporate growth are increase in sales. corporate bond market. Key Words: Sustainability. bonds. business growth and the society in general From a broader sense of macroeconomic stability and growth.

4 Review of literature The functioning of corporate bond market has been an area of interest to academicians as well as bond market participants i. 1. It will also be shown that a significant corporate bond market is in a much stronger position than the banking system to give free reign to the important disciplinary role exercised by the market forces. This is where the importance of corporate bond and the emerging significance of the corporate bond market come into play. bankers. 1. the limitations of the India’s corporate bond market and the ways to improve its role will also be suggested in this study. Literature review is followed in the next heading. similar studies conducted in the field. Research design is descriptive in nature. etc. internet sites and various other publications like The Economic Times. Another dimension that will be covered in the research would be whether the market is making significant impact in the business sector. as the economy develops. There has been a growing significant importance of direct debt financing in the course of a business’s growth and development. the financial requirements and the surrounding regulatory framework. 1. etc. It has become essential that.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues Therefore. companies need to secure external funding through more important sources like direct debt financing rather than from the internally generated funds. investors.3 Research Methodology The Research study has been conducted mostly on secondary sources of information procured from various government and SEBI publications. underwriters. brokers. The Business Standards.2 Objectives The objective of this research paper is to understand the functioning of the corporate bond market in India and how a vibrant corporate bond market can stimulate the growth of a business globally as well as regionally while maintaining stability. an entrepreneur must make a thoughtful analysis of all the possible options available to him for expanding his business by taking into account the inherent risks. It will also be studied what role it plays in economic development in regional as well as global platform.e. issuers. National Conference on Emerging Challenges for Sustainable Business 2012  275  .

● The development of a competitor source of alternative funding to the (dominant) banking sector. the process of intermediation suffers. large firms. from both domestic and foreign withdrawals.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues Thinkers. a developed corporate bond market can help avoid a credit crunch during periods of weakness in the banking sector. that business investment policies may be biased in favour of short-term projects and away from entrepreneurial ventures. all literature cannot be covered in the study due to space constraints. Private debt markets are also expected to instill more competition into the financial system and offer long-term financing. In such a situation. It has been argued that firms may face a higher effective cost of funds in the absence of the bond market. professionals and academicians have contributed to the vast amount of literature available in this area. One important issue discussed by Dubravko Mihaljek. Michela Scatigna and Agustin Villar (June 2002) is that bond market development has also been associated with changes in patterns of financing for the private sector. following are the likely benefits to be derived from the creation of a corporate debt market: ● Access to new sources of capital for existing. M.R. although these are likely to be low rated. Chatu – Mongal Sanakul (2000) discussed the role of Bond market in the overall development of the financial sector and the economy as a whole. however a corporate debt market would provide an additional source of finance. As per the study conducted by ICMA Centre (2008). only few studies conducted in this field which shows the significance of corporate bond market shall be reviewed. In the absence of such a market. banks themselves often come under liquidity pressure. He said that bond market is an important alternative to bank lending. ● Access to capital markets for smaller firms. and that firms can expose themselves to excessive foreign exchange risks if they attempt to compensate for the lack of a domestic bond market by borrowing in international bond markets (Yoshitomi and Shirai (2001). In particular. the existence of a deep and liquid bond market allows financial institutions to prepare themselves for better risk management. banks face limited competition. They also agreed that since the Asian financial crisis. the emerging economies should rely more on domestic debt markets so as to avoid concentrating intermediation uniquely on banks. Many larger Indian firms already raise capital without undue difficulty through the Indian banking sector and international debt issues. During a crisis. National Conference on Emerging Challenges for Sustainable Business 2012  276  . At this point of time. However. Henceforth.

Most issues are either by publicsector entities or by financial institutions raising money to lend onwards.0 CORPORATE BOND MARKET 2. bonds and bank lending. corporates who wish to raise funds. the demand for corporate bonds increased even further. corporate bonds are considered to be one of the main sources of external finance for businesses. Lately. often just a single bank – thus they are closer to syndicated loans than bond issues. The company promises to make a coupon or interest payment to investor. It was the fluctuation in the economic and financial position of a country that led the investors to look for varied options in making their investment. a true market for corporate debt. that the importance of corporate bonds comes into play. It is here. All the studies mentioned in the literature survey show that many studies have been conducted on the theme of bond market. These bonds are a form of credit and helps in raising funds for investment purposes as well as for initiating new projects.1 Introduction The three main sources of funding of enterprises in an economy are equity instruments. it has caused the demand for financing by banking institutions to come down.2 Meaning Corporate bonds are debt instruments issued by a corporation. in fact. investors started looking for alternatives wherein there was a much increased interest rate return as compared to the existing financing options and hence. In other words. ● Almost all issues are private placements to a small group of investors. bond financing have been gaining considerable importance in recent times. which will be a certain fixed amount made   National Conference on Emerging Challenges for Sustainable Business 2012 277  . Because of this demand for corporate bonds. since: ● Relatively few real corporates make debt issues. Of these funding instruments. issue bonds in the form of corporate bonds. 2.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues which reduces the pressure for innovation and the provision of new methods of finance for India’s growing corporate needs. mostly with a greater than one year maturity term. 2. Subsequently. It is also argued in the study that the current market is not.

As opposed to the sovereign bond markets. Because of this.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues annually or half yearly. ICRA. like certificates of deposit and Government securities. It is a dependable source of lucrative income. Thus. This is considered to be one of the main attractions of corporate bonds. the company repays the bond. the corporate bonds are of lower risk and of lower return than equities. corporate bond market encompasses many issuers of varied degree and also accompanied by terms of contract which vary from the usual standard ones. It provides diversity of choice among issuers.3 Advantages Corporate debt securities are advantageous in various aspects. • • • • • Unlike bank loans. It provides relative safety to principal. By the end of the term which is defined at the outset. Bonds issuers are rated in a manner such that the higher rated ones have a lesser chance to default on the payments to be made. that can be used up for current expenses or be reinvested for future needs. payment making capacity to bond holders as well as the protection given to bondholders in times of financial difficulties faced by the firm or business. assuming that the securities will be held until maturity. National Conference on Emerging Challenges for Sustainable Business 2012  278  . bonds have a longer duration debt issuance scheme thereby making infrastructure funding more easy. CARE. The issuers of these bond also hire agencies to rate the creditworthiness of such bonds which is based on how the agencies regard the financial stability of the firm which issue the corporate bonds. maturity dates and quality ratings and also increases the flexibility to meet a broad range of investment objectives. subject to credit quality. reducing the cost of intermediation. These advantages include the following: • It generally gives higher interest rates to the investors than other fixed-income instruments. paid either monthly or semi-annually. Duff n Phelps and Fitch. 2. The bonds are generally designated as “investment grade” or “non investment grade”. It undertakes the function of financial disintermediation by acting as an agency between those who have surplus money (savers) and those who need it for further investment (borrowers). The main rating agencies in this field are CRISIL.

particularly in a liberalised financial system. From a broader sense of macroeconomic stability and growth. From the perspective of developing countries. Some studies have observed that while developed countries rely more on market-based sources of finance. a bond market can promote financial stability (IOSCO. the developing countries rely more on bank-based sources. The crisis showed that overreliance on bank lending for debt financing exposes an economy to the risk of a failure of the banking system.4 Significance The Corporate debt market is highly significant for the overall growth of the firms’ sector in particular and the economy as a whole. countries face different types of financing choices at different stages of development. the debt market. The development of a corporate bond market. the corporate bond markets act as a buffer and reduce macroeconomic vulnerability to shocks and systemic risk through diversification of credit and investment risks. the complementary nature of bank National Conference on Emerging Challenges for Sustainable Business 2012 279    . The primary role of a banking system is to create and maintain liquidity that is needed to finance production within a short-term horizon. 2002). The East Asian crisis of 1997 underscored the limitations of weak banking systems. Its significance is represented as below: i) In any country. when banking sector becomes vulnerable. Indirect financing by banks and direct financing by bonds also improve firms’ capital structures. iii) The available economic literature suggests that meeting the demand for long-term funds by corporates. a liquid corporate bond market can play a critical role in supporting economic development as it supplements the banking system to meet the requirements of the corporate sector for long-term capital investment and asset creation. the true functioning of securitisation may not take place. ii) In many Asian economies. By contributing to a more diverse financial system. banks and other financial institutions. 2. especially in developing economies requires multiple financing channels such as the equity market. • An active bond market will enable private parties to access the market to fund projects with long duration.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues • The main essence of securitisation is all about an easily marketable instrument and unless there is a vibrant bond market. In times of financial distress. banks have traditionally been performing the role of financial intermediation. for direct financing of the capital requirements of corporates by investors assumes paramount importance.

this situation changed. Effective asset management requires a balance of asset alternatives. there would be an overweight position in government securities and even equities. In view of the underdeveloped state of the corporate bond markets. a demand had appeared for long-term finance. iv) Besides providing a channel for financing investments. with the conversion of two large DFIs into banks. its corporate debt market has not flourished due to lack of market infrastructure and a comprehensive regulatory framework. For a variety of reasons. India has successfully developed some of the critical infrastructure National Conference on Emerging Challenges for Sustainable Business 2012 280    . later on. The problems associated with the diminishing role of DFIs appeared less severe as this period coincided with a decline in the reliance of the corporates on external financing. However. The shape of the yield curve provides useful information about market expectations of future interest rates and inflation rates (Report on Currency and Finance 2005-06). when India is attempting to sustain its high growth rate. the equity market in India witnessed a series of reforms. the issuers resorted to ‘private placement’ of bonds as opposed to ‘public issues’ of bonds. The corporate relied more on banks for meeting short-term working capital requirements and DFIs for financing long-term investment. which helped in bringing it on par with international standards.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues financing and direct financing by the corporate debt market in financing corporates is desirable (Takagi. the corporate bond markets also contribute towards portfolio diversification for holders of long-term funds. v) Another significance is that the financial structure of corporates has implications for monetary policy. 2. 2001). Bond markets give an assessment of expected interest rates through the term structure of interest rates. However. Commercial banks have managed to meet this demand. In India. it is necessary that financing constraints in any form are removed and alternative financing channels are developed in a systematic manner for supplementing traditional bank credit. While the rest of India’s capital market has forged ahead and now offers a world class market. but only to an extent as there are asset-liability mismatch issues for banks in providing longer maturity credit. In the 1990s. banks and FIs have traditionally been the most important external sources of finance for the business sector.5 CORPORATE DEBT MARKET IN INDIA Currently.

5. 2. Raju. It has large private sector corporates. but the market remains underdeveloped. bonds with warrants. the spectrum appears to be complete. The more popular ones are public issue and private placement routes. investors. Anubhuti Sahay 2004). iii) Processes There are several processes that are in vogue in India as well as in other markets. public sector undertakings (union as well as state).1 Structure of Indian Corporate Debt Market The structure of the Indian Corporate Debt Market can be explained under two broad sub sections: A) Primary Corporate Debt Market The primary corporate market structure consists of issuers. fully convertible debentures (FCDs). Two main classes include private sector corporates and banks. i) IssuersIndian Debt Market has almost all possible variety of issuers as is the case in many developed markets. floating rate notes (FRNs) / bonds and secured premium notes (SPNs) (M. Over a period of time. In some markets. such as a risk-free yield curve and credit rating agencies (linked to global agencies). it is observed that there National Conference on Emerging Challenges for Sustainable Business 2012  281  . deep discount bonds (DDBs).Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues requirements. Thus. banks and medium and small companies. processes. They include partly convertible debentures (PCDs). many other instruments have been issued. zero coupon bonds (ZCBs). T. financial institutions. instruments.   iv) Intermediaries Two classes of intermediaries required for the proper development of debt market arebrokers and investment bankers/ merchant bankers. Upasana Bhutáni. rating agencies and regulatory environment. ii) Instruments Till recently Indian debt market was predominantly dominated by plain vanilla bonds.

Some of the structural features are as follows: i) Trading Platform Corporate debt instruments are traded either as bilateral agreements between two counterparties or on a stock exchange through brokers. In India. i. The WDM segment of NSE has provided a platform for trading / reporting of a wide range of debt securities. Trades are settled gross.e. Throughout the world. on wholesale debt market (WDM) segment of NSE. B) Secondary Corporate Debt Market Appropriate structure of secondary market is vital for trading. their ratings do carry confidence in the market. Institutional Investors in India are few in number and the variety also is limited. it is necessary and sufficient to have large as well as diversified institutional investors.based trading system in the whole sale debt market. We have few participants in the debt market. clearing and settlement. T. corporate bonds are traded. ii) Clearing and Settlement Mechanism Primary responsibility of settling trades concluded in the WDM segment lies directly with the participants whereas the exchange monitors the settlement. on trade for trade basis directly between the National Conference on Emerging Challenges for Sustainable Business 2012  282  .Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues are dedicated “Debt Managers” who facilitate subscription or sometimes subscribe to the issue and later on even facilitate trading in bonds. Upasana Bhutáni. Anubhuti Sahay 2004). Mostly these trades are settled in Mumbai. India needs a dedicated “Bond Manager” concept. including government securities in June 1994. The NSE introduced a transparent screen. mostly. (M. Raju. v) Investors For the development of Corporate Debt Market / Fixed Income Securities Market. the majority of transactions in corporate bonds are conducted in the over-the-counter (OTC) market by bilateral agreements. By and large. vi) Rating agencies India has a well developed Credit Rating Agency system and rating agencies are well experienced and respected.

financial institutions. The Exchange currently allows settlement periods ranging from same day (T+0) settlement to a maximum of two business days from the date of trade (T+2). State Government loans. SLR and Non-SLR bonds issued by financial institutions. Settlement is on a rolling basis. units of mutual Funds and securitized debt by banks. the size of the public issue segment of the corporate bond market in India has remained quite National Conference on Emerging Challenges for Sustainable Business 2012 283    . corporate bodies. 2. there is no account period settlement. In India. including financing patterns of companies. along with effective monitoring and surveillance to the market. iii) Instruments traded on WDM: The WDM provides trading facilities for a variety of debt instruments including government securities. However. SEBI is involved whenever there is any entity raising money from Indian individual investors through public issues/ private placement. SEBI has in fact laid down guidelines known as “Disclosure and Investor Protection (DIP) Guidelines 2000” to maintain transparency in the market and make it efficient. the corporate bond market has been in existence since long.2 Limitations of Corporate bond market The size and growth of private corporate debt market depends upon several factors. where the equity markets have been largely developed. despite a long history. Certificate of Deposit.5. The commencement of this segment by NSE has brought about transparency and efficiency to the debt market. Among market-based sources of financing. Till recently. Treasury Bills and bonds issued by Public Sector Undertakings (PSU)/ corporates/ banks like Floating Rate Bonds.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues constituents / participants to the trade and not through any clearing house mechanism. the market was purely an informal market with most of the trades directly negotiated and struck between various participants. corporate debentures. Commercial Paper. v) Regulatory Environment: The listed corporate debt is under the regulations of SEBI. the corporate bond markets in most emerging market economies (EMEs) have remained relatively underdeveloped.e. Zero Coupon Bonds. iv) Investors in WDM Large investors and a high average trade value characterize this segment. i. trusts and others.

2.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues insignificant. narrow investor base. Many reforms have recently been made in the regulatory and legal aspects of these markets leading to gearing up of the functioning in these markets. The lack of market infrastructure and comprehensive regulatory framework coupled with low issuance leading to low liquidity in the secondary market. become the chief concern of regulators in developing countries. But it remains undeveloped with small private placements norm. This alternative sources of finance need to be actively developed to support higher levels of investment and economic growth. high cost of issuance. therefore. The development of corporate debt market has. There are currently three trade reporting avenues for corporate bonds—SEBI began publishing trading details in January 2007. lack of transparency in trades and underdevelopment of securitization of products are some of the major factors that hindered the growth of the private corporate debt market. • documentation requirements for private placements have been enhanced. Four key developments have affected corporate bond markets over the past decade: • dematerialization of holdings. including better documentation requirements and improved credit rating. • increased trading transparency from compulsory reporting of trades.3 Key Developments in India’s Corporate Bond Market Several changes have helped improve transparency in the corporate bond market. as required by SEBI since 2002. • linking local rating agencies (of which there are five offering bond ratings) to international rating agencies (Table 1). Table 1: Indian Credit Rating Agencies Source: Agency Website National Conference on Emerging Challenges for Sustainable Business 2012  284  . inadequate credit assessment skills.5.

In order to meet the needs of its firms and investors. we will see how a vibrant corporate bond market can help in sustaining business growth. including one for trading conventions. SEBI now has a rolling program to monitor implementation of the key recommendations that are within its jurisdiction. they remain illiquid. It also increased market transparency by requiring transaction reports and publishing volume data. and considerably greater efficiency. a number of minor enhancements recommended in the report. have been implemented. SEBI relaxed the requirement for bond issues to be rated by two agencies and the requirement that public issues must be of investment grade. and its role played in economic development in regional as well as global platform. Such reforms will help level the playing field for investors. 3. This will mean creating new market sectors such as exchange traded interest rate and foreign exchange derivatives contracts.5. spurring innovation. But to add to its world-class equity markets. It will need a relaxation of exchange restrictions and an easing of investment mandates on contractual savings institutions to attract a greater variety of investors (including foreign) and to boost liquidity. The corporate bond market is considered to be a very crucial element in the economical development of a country and is seen as a very significant factor of the economy’s financial National Conference on Emerging Challenges for Sustainable Business 2012 285    . 2. While the government and corporate bond markets have grown in size. the country needs to improve its bond markets. particularly stamp duties. and modifying the investment rules relating to institutions. more robust markets. alleviating the global and regional economic imbalance. H.0 Role of corporate bond market in a sustainable business In this part. and growing banking sector. economies of scale. could help develop the corporate bond market. and a revamping of disclosure requirements for corporate public offers. The government has examined its recommendations on stamp duties. marked by strong economic growth.4 Measures to improve Corporate Bond Market The Indian financial system is changing fast. liquidity and competition. Patil in 2005—made a number of recommendations for improving the corporate bond and securitization markets. Tax reforms. the bond market must therefore evolve. In December 2007. issuance procedures/disclosure requirements for public issues.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues The Report of the High Level Expert Committee on Corporate Bonds and Securitization—commissioned by the Union government and chaired by R. And streamlining the regulatory and supervisory structure of the local currency bond market could substantially increase efficiency. In addition.

mainly through bank loans. For several decades.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues system. A developed market provides a comparatively higher degree of protection in relation to the banking system of a country in crisis situations as in the case when the bond market becomes undersized. considering the above mentioned reasons. with the development of the economy. the market forces and the participants have a greater chance of asserting themselves which in turn reduces the risks associated with an economy. This can be seen as helping the economy in developing rather than moving towards a crisis. the growth of the corporate bond market will take over this and this will reduce the active involvement of banks in a country’s economy. The issuance of bonds by corporate received its boost during the 1980s and 1990s. That situation is changing in recent times. These bonds allow investments to be made in assets which are attached to the low risk quotient and also in acquiring funds in comparatively liquid markets. The growth of the corporate bond market as well as its size can be seen as depending on the fund raising pattern of corporations. banks have been playing a key role in the early development of a nation. Thus. these markets ensure a great dispersion of risks in the economy. The existence of an active and vibrant corporate bond market would be very beneficial in the long run. Until recent years.e. One can also see that these markets are also essential for analysing the pricing of assets and the interest rates by banks are usually determined in accordance with the market rate for bonds. it becomes necessary to procure external financing. Subsequently. it has become very essential to speed up the growth of the corporate bond market both regionally as well as globally. Thus. It brings the participants of the market – i. the borrowers as well as the lenders together. In the first phase of the country’s development. A fully active corporate bond market is a vital element of the entire capital market in a country’s economy in the sense that it funds infrastructure projects. Later on. However. When a fully developed corporate bond market comes into existence. firms depend on funds generated from internal sources. This is sure to act as a catalyst in to the economy’s growth. but never really considered issuing bonds. corporate looked to banks or equity markets for funding. Moreover. firms with a higher standing started seeking direct financing in the form of corporate debt and equities which were assisted by investment banks amongst others. there arose numerous financing National Conference on Emerging Challenges for Sustainable Business 2012 286    . though it remained restricted in its extent of operation.

the growth of the corporate bond market will enable companies to widen its source of financing and in turn reduces bank dependency for funding. This is because such an National Conference on Emerging Challenges for Sustainable Business 2012 287    . government complicity and/or inaction tends to delay the necessary corrective measures until a genuine crisis is in full bloom. thereby reducing systemic risk and the probability of a crisis. Moreover. Hence. when the relative sizes of the banking system and the corporate bond market are more balanced. As was mentioned earlier. Thereby lowering the borrowing cost. and. It also ensures that long term unsecured funding is provided for business development. causing many of the loans to go bad. regulatory imperfections. Further. market forces have a much greater opportunity to assert themselves. moral hazard problems.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues mechanisms which tend to improve the capital structure of firms. risks are mitigated and a well channelled resource allocation also comes into place. In contrast. resulting in lax lending criteria and relaxed investment standards by companies.0 Major Findings and Conclusion This paper has argued that the presence of a well-developed corporate bond market has a strong positive effect on an economy. the resulting excessive borrowing leads to excess productive capacity. typically with the blessing of a government in pursuit of credit-allocation preferences. in too many cases. In such an environment the over-sized banking system becomes fertile ground for crony capitalism. Eventually. which in turn lowers the return on invested capital. In the absence of a sufficiently large corporate bond market free from excessive regulation. Poor accounting transparency. increase competition amongst firms and paves way for innovation. an overly large burden of corporate lending is taken on by the banking system. the need to develop an active and vibrant bond market was highly felt. The lack of a well developed corporate bond market will worsen the imperfections that are prevalent in the country’s economy. It is important in regulating the market as well as promoting a credit culture and laying down an observable standard for the participants in the market. 4. thereby providing for an alternative source of funding. as would be the case when a well-developed corporate bond market is present. such a situation will lead to borrowers turning towards foreign funding which will trigger off a crisis situation.

ICMA Centre. M. the richness of available securities will tend to enhance economic welfare. And Villar. WP/05/152. No. BIS Papers chapters: Bank for International Settlements (ed. a wide range of corporate debt securities and derivatives demanding sophisticated credit analysis. “The Development of India’s Corporate Debt Market”. June. (2002).. Levine.). 9. February. National Conference on Emerging Challenges for Sustainable Business 2012  288  . RBI Takagi. SEBI. a large community of professional financial analysts. “The Development of Corporate Bond Markets in Emerging Market Countries. “Stock Markets.” in Bond Market Development in Asia. Raju. In addition. University of London IOSCO. respected rating agencies. (2005). and Sara. (2004). Shinji. Upasana. 1998. July Report on Currency and Finance.” American Economic Review. “Corporate Debt Market in India-Key Issues and some Policy Recommendations. “An Anatomy of Corporate Bond Markets: Growing Pains and Knowledge Gains.” BIS Papers. Banks. pages 12-41. and Li Lian Ong.Role of Indian Corporate Bond Market in A Sustainable Business: Emerging Challenges And Issues environment is associated with greater accounting transparency. July. M. (2006).T. And Sahay. Bhutani. Anubhuti. 88(3):537-58. (2001). 26. Asian Development Bank Institute. Zervos. A. an opportunity to make private placements. Working Paper No. and efficient procedures for corporate reorganization and liquidation. D. and the market forces at work on the wide array of bond prices are likely to have a strong spill-over effect on the banking system as well. The Business for Financial Markets. References: Bank for International Settlements. Mihaljek.” IMF Working Paper. The development of bond markets in emerging economies. (2002). Ross. and Economic Growth. “Developing a Viable Corporate Bond Market under a BankDominated System – Analytical Issues and Policy Implications. Proceedings of Round Table on Capital Market Reforms in Asia. ‘Recent trends in Bond Markets’. Luengnaruemitchai P. volume 11. “Developing Corporate Bond Markets in Asia. 2005-06.” May.. (2008). Scatigna.

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