Crypto awareness outscoring bonds disappoints Sebi chief

MUMBAI: Sebi chairman Tuhin Kanta Pandey Wednesday expressed his disappointment at the fact that more Indians know about cryptocurrency than about corporate bonds. “Sebi’s investor survey shows awareness of corporate bonds as an investment product is only about 10%, well below deposits, insurance, and small savings. Even cryptocurrency has higher awareness at 15%,” Pandey said.

He was speaking at the inaugural session of a program on the corporate bond market. The survey results published on Jan 20, showed that among Indian households, the awareness about cryptocurrency was at 15%. In comparison, the corresponding numbers for futures & options was 13% while for corporate bonds and Reits & InvITs it was at 10%. The highest awareness among the households surveyed was for fixed and recurring deposits, at 98% while for mutual funds it was at 53% and for stocks & shares at 49%.

Pandey stressed on the need for spreading awareness about corporate bonds and spoke about the various benefits that could accrue from the same. “A well-developed corporate bond market gives corporates an alternative to bank borrowing, especially for long-term funding. It diversifies risk beyond the banking system and can help bring down cost of capital for corporates.” Pandey also said that for retail investors, “corporate bonds offer portfolio diversification beyond equities and bank deposits. Access through regulated products and platforms, can help households participate in fixed income securities with clear disclosures and strong investor protection.”

The top regulator also spelt out various challenges that the Indian market faces while developing a robust corporate bond market. For one, the current bond market structure is heavily skewed towards highly rated issuers. Also fund raising is highly loaded in favour of financial institutions, rather than a diverse range of industries, which, among others, restricts fair price discovery across sectors. Secondly, the secondary market for corporate bonds is shallow because institutions mostly follow a ‘buy and hold’ approach rather than active trading. And “(retail) participation in corporate bonds remains extremely low- nothing as compared to equity markets.”

The Sebi chief said that regulation alone cannot build a robust bond market. So, to understand what keeps the bond market from being as robust as the equity market, he asked the participants to share with the regulator various challenges, what drives their preferences in this market etc.

Later, while speaking to reporters, the Sebi chief said that the US-India trade deal could help get more investments into India and help in capital formation.

“Fundamentally, when you have an overhang of a regulatory action which is removed, and trade frictions removed, so any capital formation is always accelerated,” Pandey told PTI.