Bond boost

Bond boost: For RBI’s moves on corporate bonds to work, domestic institutions need to be more active...

Bond market management

This refers to your editorial “Bond boost” (The Hindu Business Line, August 29). A wholesale revamp of bulk borrowing by both government and corporates and funds management by both private and public sector organisations is overdue. The sector-specific or instrument-specific approach to funds management is doing more harm than good to the markets affected and has an impact on the public trust in financial instruments and institutions (including government/s) which manage them.
To restore trust and reduce the damage already done by creating uncertainties in regard to public debt management and funds management by organisations like EPFO and LIC by using them as captive source for channelling resources to sectors/projects identified by GOI, some quick remedial measures should be considered by GOI in consultation with RBI:
(a) Adjourn the idea of take over of public debt management by GOI from RBI. This will help in using the RBI’s clout to retain G Secs marketable at least in the captive market of banks and financial institutions as hitherto, till a retail market for these instruments is developed.
(b)Allow organisations like EPFO and LIC to manage their funds professionally with the long term interests of the savers in view. Temporarily, this may mean a higher cost on government borrowings.
(c)  Have a re-look at the basket of instruments in which banks are allowed to invest SLR funds. Perhaps the level of SLR required to be maintained too may need a review in the context of rising capital adequacy norms.

M G Warrier, Mumbai

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