Suggestive measure
NITI Aayog moots setting up dedicated regulator to deepen corporate bond market
This story was originally published at 20:42 IST on 11 December 2025
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NEW DELHI – The government's top think tank, the NITI Aayog, has suggested establishing a dedicated regulator, introducing tax reforms, and relaxing investment mandates for institutional investors such as pension funds and insurance companies to deepen India's corporate bond market.
"India's ambition to become a higher-income country by 2047, Viksit Bharat, requires a financial system that can mobilise long-term and low-cost capital efficiently to sustain high investment and inclusive growth," NITI Aayog said in a report on deepening the corporate bond market in India, released Thursday. "In this context, a deep and vibrant corporate bond market is indispensable to complement the banking system, reduce systemic concentration risks, and provide a stable source of long-term financing for infrastructure, industry, climate actions and emerging sectors."
The report suggested establishing a dedicated corporate bond market regulator within the next four to six years, with a mandate covering all aspects of the market, including issuance, trading, settlement, disclosures, credit rating agencies, and data management. This would ensure cohesive market development, sustained supervision, and alignment with international standards, the report said.
"A lot has happened in the last 10 years. But it is still early days in the journey (of deepening the corporate bond market)," NITI Aayog Chief Executive Officer B.V.R. Subrahmanyam said at the launch of the report. "If you want to beat the global benchmark, your (corporate bond) market has to be seven times larger. That is telling you how big the mountain is that we have to climb," Subrahmanyam said.
India's corporate bond market has expanded at a 12% annual rate over the last 10 years, with outstanding issuances rising to INR 53.6 trillion in 2024-25 (Apr-Mar) from INR 17.5 trillion in FY15. The country saw the highest-ever fresh issuances of INR 9.9 trillion in FY25. However, India's corporate bond market accounted for 14% of the country's GDP in 2023. This is much lower than South Korea's 79% of GDP, the US's 37%, and China's 38%, the report said.
With continued policy focus, technological innovation, and harmonised regulation, the total outstanding in India's corporate bond market could exceed INR 100–120 trillion by 2030, the report said.
NITI Aayog said that pension funds and insurance companies, which hold substantial long-term capital, face investment restrictions limiting their bond market exposure. A potential relaxation of restrictions on institutional investments over the next two to four years is warranted, the report added.
The measures proposed in the report are mapped across three implementation phases. The first phase of measures looks to strengthen the existing foundation over the next one to two years. In the first phase, NITI Aayog recommended improving regulatory synergy among the Securities and Exchange Board of India, the Reserve Bank of India, and the Ministry of Corporate Affairs by harmonising disclosure norms and listing obligations.
Other near-term suggestions include developing corporate bond indices, encouraging demat trading for listed bonds, promoting bond platforms for direct bond buying and selling, and improving the reliability of credit rating agencies by strengthening the regulatory and oversight framework.
To deepen the corporate bond market over the medium term, NITI Aayog suggested tax reforms to harmonise with the framework of its equity and government bond markets and to recognise bonds as a long-term wealth-building tool. It also proposed strengthening bankruptcy laws and the resolution framework, and introducing an issuance framework for lower-rated corporate bonds to broaden capital access for businesses. End
US$1 = INR 90.37
Reported by Shubham Rana
Edited by Saji George Titus
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