Regulators meet to discuss deepening of bond market, banks' capital needs

MUMBAI: India’s financial regulators on Wednesday met to discuss measures that can be taken to deepen the bond market and ways to boost bank capital. A sub-committee of Financial Stability and Development Council (FSDC) chaired by the governor of the Reserve Bank of India Raghuram Rajan met in Mumbai. The meeting was also attended by representative from finance ministry and other regulators.

A statement issued by the RBI said, “The Sub-Committee deliberated upon matters relating to account aggregation facility, capital requirement of banks, measures to deepen the credit default swap market and corporate bond market” . It also said that the sub-committee reviewed various global and domestic factors that can impact the financial stability of the country.

According to ICRA estimates, banks will require additional teir I caputal of about Rs. 400–500 billion by 2018 to meet the Basel III requirements. The onus would be on government to boost the capital of state run banks - which has 70% market share- as they hold majority stake in them.

regulators are keen to deepening the bond market so that corporates would have alternate source of raising funds instead of relying only on banks. It also build confidence among investors as it would enable them to enter and exit from the debt market easily.

The meeting was attended by Hasmukh Adhia, secretary, department of financial services, U. K. Sinha, chairman, Securities and Exchange Board of India (SEBI); T.S. Vijayan, chairman, Insurance Regulatory and Development Authority of India (IRDAI); Hemant G. Contractor, chairman, Pension Funds Regulatory and Development Authority (PFRDA); Ramesh Abhishek, Chairman, Forward Market Commission (FMC); i Ajay Tyagi, additional secretary, department of economic affairs (DEA).

From RBI, deputy governors H. R. Khan, Urjit Patel and Shri R. Gandhi while executive directors Deepak Mohanty and N.S. Vishwanathan also attended the meeting.