Mumbai: Former Reserve Bank of India (RBI) governor YV Reddy has questioned the ability of the local corporate bond market to help in financing infrastructure projects, saying that no where in the world except the US has that market helped in raising long term finances consistently.
“Where in the world has infrastructure been financed by the bond market?” Reddy asked speaking at the RBI organized conference on investment and financing in Asia.
Reddy was chairing a session titled ‘The impact of infrastructure bottlenecks on Asian growth’..
“Empirical evidence in Europe, in UK or Asia, China or Japan does not suggest that the corporate bond market has helped,” Reddy said adding that it’s only in the US that the market has financed infrastructure projects.
“But you cannot take the US experience in today’s context,” he said.
Interestingly, Reddy’s comment came just a day after the current RBI deputy governor Subir Gokarn said that the burden of financing infrastructure should be taken away from banks towards channels like the corporate bond market.
Speaking at the same conference on Thursday, Gokarn said that the development of the corporate bond market is “most important.”
“We do see the bond market as something that will supplement the capacity of the banking system and over time displace it as the primary vehicle of a large quantity of finance moving into infrastructure,” he said.