Recent Measures A Fillip For Nascent Bond Market

With ever increasing levels of non-performing assets (NPAs) in the banking system, the Reserve Bank of India (RBI) has been seeking ways to reduce the burden of providing credit on banks. In particular, the RBI has emphasized shifting long-term credit requirements such as project loans, and credit to borrowers with a large exposure to the banking system, to the bond market. Following its monetary policy announcement in April, the RBI released a discussion paper on facilitating "credit supply" for "large borrowers" through the bond market.

This discussion paper was a follow-up to one issued on the same subject in March 2015, and focused on discouraging banks from providing credit to borrowers exceeding a specific size so as to reduce credit concentration risk in the banking system. An ancillary goal of the discussion papers was to encourage borrowers to tap the bond market for their working capital and term loan requirements. Final guidelines, effective from 1 April