NITI Aayog Unveils Roadmap to Deepen India’s Corporate Bond Market

The NITI Aayog has released a comprehensive report outlining strategies to strengthen and expand India’s corporate bond market, offering both short-term and long-term measures. The report arrives at a time of growing investor interest and increasing trading volumes, with 2025 already showing robust activity in the bond segment.

Current Market Landscape

India’s corporate bond market currently stands at 16% of GDP. The report lays out plans to significantly expand this share by 2030 and 2047, in alignment with the government’s ‘Viksit Bharat’ vision.

Key Challenges Hindering Growth

The report identifies several obstacles limiting the market’s development:

• Shallow Secondary Market: Low liquidity and limited price transparency hinder efficient trading.
• Investor Concentration: Heavy dependence on banks, with limited participation from MSMEs, retail investors, and foreign portfolio investors (FPIs).
• Regulatory Complexities: Overlapping regulations, cumbersome disclosure requirements, and procedural delays restrict market efficiency.
• Investor Constraints: Existing norms cap institutional exposure to lower-rated bonds, and weak debt recovery mechanisms further impede confidence.

Proposed Multi-Pronged Reform Agenda

To address these challenges, the report proposes a comprehensive set of reforms:

• Strengthening Market Infrastructure: Development of unified databases, improved settlement systems, and active use of digital tools to facilitate market-making.
• Broadening the Investor Base: Introduction of incentives and benefits aimed at encouraging first-time and diverse investors to enter the market.
• Regulatory Simplification: Creation of unified market authorities and streamlined issuance processes to enhance operational efficiency.
• Financial Innovation: Launching new instruments to cater to varying investor needs and risk appetites.
• Legal and Recovery Reforms: Strengthening debt recovery processes and bankruptcy resolution frameworks to enhance investor confidence.

Conclusion

The market experts anticipate that recent growth trends could potentially double market activity by the end of 2026, making these reforms crucial for sustainable development.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

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