Home / Market / Stock-market-news /  RBI planning to set up bond index

Mumbai: The Reserve Bank of India (RBI) is planning to setting up a bond index, much like equity indices such as BSE Sensex and NSE Nifty, to attract more investments to the bond market.

“In the stock market we have indices, so we are seeing if we can create a similar index in the bond market to attract bigger investments," said H.R. Khan, deputy governor, RBI, while speaking at an event organised by industry lobby Federation of Indian Chambers of Commerce and Industry (Ficci).

In April, RBI said it would try to attract more retail investors to the bond markets through various means. This included permitting retail investors to participate in the bond markets through web-based platforms. The central bank also said that it would look at allowing retail investors direct access to the primary and secondary debt market.

Simultaneously, RBI has also been opening up the debt markets to foreign investors and said it will allow foreigners to hold up to 5% of government securities by 2018.

Khan, however, put in a note of caution, saying there is no need to open up “too fast and too much". “Right now there is no pressing need for India to open up too fast and too much (to foreign investments in local bonds). Every now and then we get sneezes and fever about what happens in Washington or in Beijing. So I think we have to move cautiously," Khan said.

The central bank has already announced a road map to increase debt investment limits for foreign investors over the next couple of years and it will stick to that unless there is any major change in the investment scenario, he added.

Addressing a group of bankers, fund managers and corporate representatives, Khan said that the banking regulator is looking at ways to improve regulations around rating agencies because of the large number of sudden rating downgrades seen in recent months. Capital market regulator Securities and Exchange Board of India (Sebi) is also reviewing practices of rating agencies.

“There have been some cases where they went from illness straight to the mortuary, without going through the ICU (intensive care unit). Whether the people involved were sleeping or rating agencies did not do proper due diligence, there is a whole gamut of issues around ratings that needs to be looked at closely," the deputy governor said.

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