Stimulus calls for a Bond Market

The Economic Times     27th May 2020     Save    

Context: The government needs to push for the corporate bond market and credit guarantee mechanism in order to boost investment and demand.

Recommended steps:

  • Policy induced Insurance & pension Funds: to invest bonds issued to fund viable infrastructure projects.
  • Creating a Corporate Bond Market: Money raised from RBI through it can then be used by State owned vehicles to invest in corporate NBFC bonds to finance infrastructure bonds. This would also encourage foreign investors.
  • Reduce Taxes: eliminate Transaction Taxes, and burden of stamp duty be minimal and uniform across states.
  • Discourage bank funding for long gestation projects: it leads to routine asset liability mismatches.
  • Operationalize Credit Guarantee Enhancement Corporation: it can free up about Rs 3.5 lakh crore of bank exposure to the infrastructure sector.