MUMBAI, Jan 10: Niti Aayog is assessing methods to rebalance the relationship between the expansive government debt market and the corporate debt market, as stated by a senior official on Friday.
The government think tank is set to evaluate the potential consequences of any initiatives aimed at enhancing the corporate debt market, according to its vice chairman Suman Bery during an event held here.
“A balance we need to achieve is between corporate and government debt, determining what is required in terms of fiscal adjustment and the liquidity within the corporate debt market. These topics are currently being explored at Niti (Aayog),” Bery indicated at an event organized by the Sebi-backed NISM.
The government securities market has been robust for numerous years, bolstered by policies such as a mandatory statutory liquidity ratio (SLR) for banks, which guarantees that the government possesses sufficient resources to pursue its developmental goals. Additionally, there is a vibrant secondary market for trading such bonds.
In contrast, substantial efforts have been directed towards strengthening the corporate debt market, which provides an alternative to bank financing for businesses.
The government’s net borrowing target for FY25 is estimated at Rs 11.63 lakh crore, while corporations have raised Rs 7.3 lakh crore from the corporate debt market in the first three quarters of the fiscal year.
Bery also noted that alongside rising income levels, it is essential to enhance financial literacy among a broader population, ensuring that an “excessive focus” on safety does not lead individuals into more precarious investment portfolios.
He mentioned that Sebi must take “aggressive” steps in investor education as the readiness of Indian households to engage with the riskier domain of capital markets solidifies.
India can adopt a strategy that blends a banking-centric system with a more capital market-driven approach, he added.
Clarifying the two distinct strategies, Bery explained that the US model is led by capital markets willing to fund riskier ventures, whereas Europe has traditionally relied on a banking-system-oriented approach. (PTI)
