Latest News | Need to Develop Low, Medium-rated Corp Bond Mkt; ESG Investing No Longer a 'fad or a Buzzword': Ajay Tyagi

New Delhi, Jul 8 (PTI) Former Sebi chief Ajay Tyagi on Friday stressed on the need for developing a low- and medium-rated corporate bond market, a move that will help more number of issuers across the rating spectrum to tap into it as an alternative to bank financing.

Apart from the bond market, he focused on two broad areas -- use of technology and ESG investing, which is no longer just a "fad or a buzzword".

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Speaking at an event at IIT Bombay, Tyagi said although the corporate bond market has grown in recent years, its success has remained limited to higher rated papers.

As of now, 95 per cent of issuance is concentrated in top 3 rating categories -- AAA, AA+ and AA. Similarly, 97 per cent of trading is in these top three rating categories.

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"There is a need for development of below 'AA' rated corporate bond market so that more number of issuers across the rating spectrum can tap into it as an alternative to bank financing," he said.

This is particularly true for infrastructure companies as they generally are in the low-to-medium rating category during the initial phase of their lifecycle.

For the development of the bond market, Tyagi suggested that the government and regulators should immediately implement measures like backstop facility for purchase of debt securities, credit enhancement mechanism and setting up a Development Financial Institution (DFI) for debt financing of infrastructure.

These measures, which have been in the pipeline for quite some time, need to be implemented by the government and regulators without further delay, he said.

He also advocated for unifying the regulatory regime for government securities (G-Secs) and corporate bonds -- both for issuance and trading.

Talking about technology, the ex-chairman of Sebi was of the view that fintech and other possible technology usages need innovative ideas and 'out-of-the-box' thinking and the regulatory framework has to keep this in mind.

"An appropriate mix of 'principle based' and 'rule based' approaches need to be followed while drafting such regulations," he added.

With regard to ESG (Environment, Social and Governance), Tyagi said there is an urgent need for putting in place a regulatory framework in India to accredit ESG rating providers.

"Globally, ESG investments have emerged as a subject of great interest and significance in recent years. It is no longer just a fad or a buzzword," he said.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)