• Bond market penetration: India's corporate bond market stands at $0.64 trillion (16% of GDP) and municipal bonds at $0.5 billion, significantly trailing the US ($11.55 trillion corporate, $4.4 trillion municipal) and China ($11.15 trillion corporate). Total debt borrowing accounts for 72% of India's GDP, compared to 151% in the US and 120% in China.
• Rural debt distribution: To tap household savings and expand beyond metropolitan hubs, bond products with denominations as low as ₹1,000 must be distributed across tier-2, tier-3, and rural areas. SEBI is evaluating a debt distribution framework to offer retail savers inflation-beating returns of 7% to 10%.
• Liquidity and credit enhancement: AK Mittal advocated for issuer-funded credit default swaps on lower-rated papers and an insurance model similar to DICGC through a Fixed Income Credit Guarantee Scheme. Active market making is crucial to provide liquidity so non-institutional investors are not forced to hold bonds strictly to maturity.
• MSME borrowing costs: MSMEs currently face steep borrowing rates of 10% to 26%, which severely strains manufacturing and unsecured enterprises. Deepening the bond market and enabling direct investor funding can improve financial system efficiency and lower the cost of capital.