Corporate bonds are debt instruments issued by private and public corporations to raise funds for purposes such as expansion, infrastructure, or overall business growth.
Status in India
- It now constitutes about 15–16% of India’s GDP. (However, it is well below that of countries such as South Korea (79%), Malaysia (54%), and China (38%).
- India’s CBM has grown rapidly from ₹17.5 trillion in FY2015 to ₹53.6 trillion in FY2025, reflecting nearly 12% annual growth.
Challenges to develop CBM
- Regulatory Overlapping and Fragmentation: CBM governed by multiple regulators, including SEBI, RBI, and the MCA.
- Extensive Disclosure Requirements: Particularly for lower-rated or infrequent issuers.
- Weaknesses in the Credit Rating Agency (CRA) Framework: Conflicts of interest due to the issuer-pays model, high entry barriers etc.
- Others: High entry costs, information asymmetry, and the absence of a secondary market.
Way Forward
- 3 Phase Solution:
- Phase I: Streamline inter-agency regulations, further standardize disclosure norms, and simplify issuance procedures to enhance legal and regulatory clarity.
- Phase II: Strengthen the bankruptcy and resolution process by improving IBC effectiveness, fostering product innovation, and enabling better market access for lower-rated debt.
- Phase III: Focus on deeper market integration, adoption of global best practices, exploration of an independent bond market regulator, and development of a digital ecosystem.