Corporate bond market in India

Abstract

Corporate Bonds have been used for several years to fund large projects and as an alternate funding source by corporations in lieu of bank debt or equity issuance. They are also used as a safe investment option by relatively risk-averse investors. Equity markets, Derivatives markets and the debt market form the 3 pillars of the stock-related investment opportunities in any country. These 3 markets combined together can offer complete solution for every kind of investor. The Indian Corporate Bond market is quite new and there has been considerable debate regarding how it can be made bigger and more efficient. This Contemporary Course Study (CCS) report tries to compare the genesis and growth of the Indian Corporate Bond Market and then contrast it with markets in developed economies of US, Japan and Korea and the market of emerging economy of China. The paper discusses the importance of the Corporate Bond market for India in specific. The Paper explains what are corporate bonds and their importance. It explains the steps that can be taken for the development of the corporate bond market in an emerging economy in general. Thereafter, it discusses the Indian, US, Japanese, Korean and Chinese market in detail. Each market has its own unique characteristic. However, there are some common points in every market. Every market has gone through its own learning curve and this learning can be used for the benefits of young markets like India which can avoid the outfalls that have happened in the past in other markets. The paper concluded with recommendations for the Indian Corporate Bond market which vary from policy changes to recommendations for issuers.