The report frames a deeper corporate bond market as a strategic pillar for financing India’s development goals and the Viksit Bharat @2047 vision. It argues that over-reliance on bank credit constrains long-term financing and that a vibrant bond market will broaden funding channels, improve risk-sharing and support sustainable investment across the economy.
Where India Stands Today
While corporate bond volumes and regulatory improvements have expanded over the past decade, the report notes persistent structural weaknesses. Market depth remains limited, secondary-market activity is modest, and investor participation is concentrated among a few institutional players. These gaps constrain price discovery and deter smaller issuers from tapping market finance.
NITI Aayog emphasises that unlocking the market’s potential requires simultaneous action on legal clarity, market infrastructure, investor incentives and product innovation.
Sequenced Reforms: Practical and Policy-Focused
The report recommends a sequenced set of reforms divided across legal, infrastructure, investor, issuance and technology fronts. Key proposals include strengthening creditor rights and insolvency mechanisms for bondholders, harmonising disclosure standards, and introducing clearer regulatory guidance that enhances issuer credit visibility.
On market infrastructure, the study urges expansion of repo facilities, stronger market-making frameworks, and improved clearing-and-settlement processes to support primary and secondary liquidity. These measures are intended to reduce transaction frictions and encourage active trading.
Broadening the Investor Base
A central objective is to widen participation beyond traditional institutional investors. The report advocates calibrated incentives for insurance and pension funds to allocate more to corporate bonds, the creation of retail-friendly bond products, and targeted outreach to mutual funds and alternative investors.
By diversifying investors, the market would become less susceptible to concentration risks and better able to absorb large, long-tenor issuances needed for infrastructure and green projects.
Supporting Mid-Sized Issuers and Product Innovation
Mid-size firms currently face high issuance costs and limited access to bond markets. NITI Aayog proposes credit enhancement vehicles, pooled issuance structures and partial guarantee schemes to lower barriers and enable more companies to raise long-term debt.
The report also recommends product innovation sustainability-linked bonds, long-tenor instruments and credit-enhanced securities to match investors’ preferences and project financing needs, especially in green and transition finance.
Technology and Transparency
NITI Aayog highlights the promise of digital innovations, such as tokenised bonds and integrated data platforms, to improve transparency, reduce settlement time and enhance price discovery. Piloting such technologies could lower costs and attract new investor cohorts.
Implementation: Coordination and Pilots
The study calls for coordinated action across the Ministry of Finance, RBI, SEBI, pension and insurance regulators, stock exchanges and market infrastructure providers. It recommends implementing pilot reforms, establishing clear timelines, and building institutional capacity to monitor impact and scale successful measures.
Shri B.V.R. Subrahmanyam described the report as an “analytically rich” blueprint that can reduce bank-dependency and mobilise stable private capital for national priorities. He urged regulators and market participants to pursue practical, measurable reforms to unlock the market’s latent potential.
Why It Matters
A deeper corporate bond market can lower the cost of long-term capital, support climate and infrastructure financing, and enable more efficient capital allocation across sectors. For policymakers, the report provides a clear menu of options to grow the market while safeguarding investor protection and market stability.
