How regulations have failed our fixed-income securities market5 min read 06 Oct 2021, 09:49 PM IST
We can no longer ignore the absence of a credible secondary market for corporate debt and RBI must act swiftly to resolve this
The March 2020 redemption debacle will always be remembered as a moment of reckoning for India’s fixed- income mutual fund industry. While the resultant folding of certain debt funds by Franklin Templeton came as a shock, it was nevertheless a glimmer of an uncomfortable reality that had lurked for years. Amid the denigration inflicted upon the industry, perhaps the greatest error of judgement pertained to the convenient omission of the fact that India lacks a credible secondary market for corporate debt securities. This means that the risk of holding such debt is extremely concentrated in the system, which in India largely comprises the Reserve Bank of India (RBI), commercial banks, foreign institutional investors (FIIs) and mutual funds.