Analysts, market participants hail RBI move on bond markets

Mumbai, Aug 25 (PTI) Market participants and analystshave hailed the Reserve Bank’s measures announced today todeepen the corporate bonds market, saying the move will go along way in developing the nascent debt space. Welcoming the RBI measures, Karthik Srinivasan, SeniorVice-President, Icra, said, "The slew of measures announced byRBI should encourage greater participation from issuers,investors and intermediaries as it has accepted many of therecommendations of the Khan committee report." Specifically welcoming the move to allow banks to raisemasala bonds, he said this can develop the overseas market forrupee-denominated bonds. He also said the access to the repo window for the debtbrokers, coupled with the access to trade directly on G-secsand corporate bonds for foreign portfolio investors, shouldimprove liquidity in domestic markets. Earlier today, outgoing Governor Raghuram Rajan relaxedthe guidelines for corporate bond market and allowed banks toissue masala bonds. To improve fixed income and currency markets, RBI allowedlenders to issue ‘masala bonds’ and will accept corporatebonds under the liquidity adjustment facility (LAF). Credit Suisse India’s Gaurav Pradhan termed it as anextremely proactive step from RBI which acknowledges thepotential of the masala bond market. "Issuance by banks will help broaden and deepen themarket for masala bonds, making the product more sustainablein the long run as a financing option. From a macroperspective, we expect RBI’s move to help banks better managetheir balancesheets and lower their cost of funds, and shouldhave a positive impact on local interest rates," said Pradhan. Consultancy PwC India’s partner Munesh Khanna said themove is in response to long-pending demand from the market. "To meet the long-standing demand of deepening thecorporate bond market, these steps… are extremely welcome.In addition, the ability of banks to issue rupee bonds fortier 1 and 2 capital and for financing infra projects augurswell for the economy," Khanna said. MORE PTI BEN KRKARDJMF