Mr. Khadilkar started the lecture with discussing the usual financing options available to the corporates in India and where India stands in terms of the bond market in the global context.
A company starts with investing their own Equity in the business but there are other sources such as debts in the form of loans from banks and the bond market. Both the equity market and the debt market consists of a wide range of market participants. Drawing a comparison between loans and bonds, he explained how banks chose between loans and bonds. Loan in a bank is a bilateral arrangement and has its own risks and challenges attached to it, and is therefore no longer the most attractive source of income for them in today’s market. On the other hand, bonds are more standardized and liquid in nature. Unlike loans, bonds are also rated, which attracts a wide range of investor pool. So, bonds are better than loans in these aspects and therefore there is a need for the development of the bond market in India.
He also gave an overview of the Indian bond market in the global context, in comparison to some of the developed and developing economies like the US and Japan.
Talking about the creation of demand for bonds in the Indian market, he discussed why the country needs it in terms of infrastructure financing, GDP growth and the Government’s take on fiscal discipline. He also discussed the working of the RBI Working Group in the Indian financial market.
In the end, he concluded by discussing the various kinds of bonds avaiable to the investors today in the Indian market, how the bond market is evolving in the financial system and will bring about a sea change in the coming years for banks and corporates, not only in India but all over the world.