November 29, 2013 / 12:04 IST
India's infrastructure and banking sectors will require Rs 10.4 trillion from the bond market over the next 5 years, To facilitate this, greater regulatory focus is required in three areas - deepening of the bond market, developing innovative credit-enhancement mechanisms for infrastructure projects, and building investor appetite for banks' non-equity capital, said CRISIL.
CRISIL also released its first ‘Yearbook on the Indian Debt Market - 2013', a comprehensive, one-of-its-kind publication, at the seminar. According to the yearbook, the Indian bond market has witnessed sizeable growth in issuances and increasing participation by issuers and investors. Encouragingly, there have been several innovations in the bond market during 2013, including the first 50-year rupee bond and the first inflation-indexed debentures by Indian companies, five Basel III compliant issues by banks, and the launch of two infrastructure debt funds.It is imperative to build on this foundation of growth and innovation to meet the sizeable funding requirements of the country's infrastructure and banking sectors. Says Ms. Roopa Kudva, Managing Director and CEO, CRISIL: "The Rs.10.4 trillion bond funding required for these two sectors translates to an average issuance of Rs.2.1 trillion annually in each of the next five years. This is nearly 60 percent higher than the average annual issuances made by these sectors in the last three years. This calls for steps to deepen the bond market by encouraging greater foreign participation, and by liberalising investment norms for long-term investors."The Indian infrastructure sector alone will need Rs.7 trillion from the bond market over the next five years. Currently, bond market finances the infrastructure sector indirectly through specialised institutions. Says Mr. Pawan Agrawal, Senior Director, CRISIL Ratings: "In 2012-13, just five financial institutions issued nearly 60 percent of the (Rs.1.3 trillion) bonds raised to fund infrastructure. Therefore, encouraging direct access of infrastructure projects to bond market is a key priority." This can be achieved by a strong regulatory and policy focus on developing innovative credit-enhanced structures, allowing banks to provide credit enhancement and facilitating the scale-up of infrastructure debt funds (IDFs). CRISIL has recently rated the two IDFs set up as non-banking financial companies.Indian banks also seek Rs.3.4 trillion non-equity capital under the Basel III regulations till March 2018. A good beginning is already visible, as five banks have raised Rs.60 billion by issuing Tier II bonds, all rated by CRISIL. Adds Mr. Agrawal, "The key challenge lies in raising Tier I non-equity instruments, due to their riskier features of coupon discretion and principal loss absorption at specified capital thresholds." For building investor appetite for such instruments, guidelines for long-term investors will need to include eligibility for Tier I instruments.Disclaimers: This Press Release is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The Press release may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution of its Press Releases for consideration or otherwise through any media including websites, portals etc. CRISIL has taken due care and caution in preparing this Press Release. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of information on which this Press Release is based and is not responsible for any errors or omissions or for the results obtained from the use of this Press Release. CRISIL, especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this Press Release. 
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