Bond demand to outstrip supply in 5 yrs: RBI dy guv
Mumbai: An RBI deputy governor has said that demand for bonds in India will significantly outstrip the supply in five years. To develop the bond market, the RBI is looking at banks selling more of their loans and new types of investors being allowed to participate.
This statement by the deputy governor seems to indicate a tapering of the government borrowing, considering that the bulk of the bond market in India comprises of government bonds. In 201920 alone, the central government is expected to issue Rs 7.1lakh-crore bonds under its borrowing programme.
Speaking on what needs to be done to develop a bond market, RBI deputy governor B P Kanungo said the most important prerequisite of a liquid and robust market is wide participation by agents with large volumes of merchandise. “In this respect, banks constitute the single largest set of entities followed by insurance companies, pension funds, and now alternative investment funds. It has been generally observed that entities with a large holding of government securities are not very active either in markets or in innovation,” he said. He was speaking at an event organised by Indian bond dealers in Moscow last week.