Banks can undertake 'proprietary transactions' in bond market: RBI
MDT/PTI 06 November 2012

The central bank has allowed scheduled commercial banks to become members of SEBI approved stock exchanges for undertaking proprietary transactions in the corporate bond market

Mumbai: The Reserve Bank of India (RBI) has said banks can become members of stock exchanges to undertake 'proprietary transactions' in the corporate bond market, reports PTI.
"In order to further enhance transparency, it has been decided to permit scheduled commercial banks (SCBs) to become members of Securities and Exchange Board of India (SEBI) approved stock exchanges for the purpose of undertaking proprietary transactions in the corporate bond market," the RBI said.
While India has a very advanced G-sec market, its corporate bond market is relatively underdeveloped.
Various stakeholders, including government, RBI, SEBI and Insurance Regulatory and Development Authority (IRDA) in the recent times have made co-ordinated efforts to help development of a more vibrant corporate bond market.
RBI Deputy Governor HR Khan recently said that while the measures taken so far have generated the momentum needed to develop the corporate bond market, the indicators are suggesting that the market is yet to develop to its potential in relation to needs of India's macroeconomy.
The size of the Indian corporate bond market at 11.8% of GDP is lower than the average for Emerging East Asia and for Japan at 17.2% and 19.8%, respectively.
Some of the initiatives taken by the RBI to develop the market include measures to impart liquidity by permitting repo transactions in corporate bonds and increase transparency by capturing information related to the trading, have been taken.
A well-developed corporate bond market provides additional avenues to corporates for raising funds in a cost effective manner and reduces reliance of corporates on bank finance.
Total issuance of corporate bond market increased to Rs2.96 lakh crore in 2011-12 from Rs1.74 lakh crore in 2008-09. Similarly, trade volume has increased to Rs5.93 lakh crore in 2011-12 from Rs1.48 lakh crore in 2008-09.
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