The Reserve Bank of India is expected to announce a slew of measures to bring vibrancy into the debt market as part of its mid-term review of the annual monetary policy.
This is in response to Prime Minister Manmohan Singh's call for deepening the debt market to fund infrastructure projects.
After the R H Patil committee on corporate bonds and securitisation submitted its report early this year, the RBI constituted a working group to examine the relevant recommendations and suggest a roadmap for its implementation in consultation with other regulators, the Securities and Exchange board of India and the Insurance Regulatory and Development Authority.
The forthcoming mid-term review of the monetary policy is expected to outline the RBI's action plan.
The central bank is expected to allow repos (repurchase) in corporate bonds. This will give an opportunity to investors who have illiquid corporate bonds to recycle them and borrow money against these securities and add depth to the debt market. Repo is currently allowed only in government securities.
The RBI is also likely to fine-tune its existing guidelines on the securitisation of standard assets by banks. The guidelines led to an anomalous situation where the issuer needs more capital to securitise his assets.
The proposed requirements for capital consumption needed to be suitably reduced to avoid this anomaly, the Patil committee had stated.
Bankers also expect the RBI to take an initiative to introduce debt market derivatives and short-selling in government securities.
Though it has allowed short selling of gilts in a limited way, there is no impact on the market breadth as the players need to square off their positions before the end of the day.
