Enabling framework needed to help companies issue ESG bonds domestically: RBI official

There is a need to create an "enabling framework" to help Indian companies issue environmental, social, and governance (ESG) bonds locally, a senior RBI official said on Friday. Underlining that capital markets regulator Sebi which looks after the regulations for the bond markets has done significant work, Dimple Bhandia, the chief general manager in RBI, also rued that the development in the repo for corporate bonds has not been satisfactory.

"...We find that a lot of our companies are going overseas and issuing ESG bonds. This is an area where we need to look at an enabling framework," Bhandia said, speaking at an event organized by industry lobby grouping Assocham here. Another disappointment has been the "non-starter" credit derivatives market, she said, recalling that a very limited number of trades have taken place in it.

She, however, said that the overall secondary market activity in corporate bonds is not as bad as one would think. Bhandia said even though its base is lower, the the growth in corporate bond issuances has been higher than banks' credit growth in the last decade and added that the broadly stable spread on corporate paper over G-sec is illustrative of the maturity.

She also welcomed foreign portfolio investors' response to the voluntary retention route facility, pointing out that 99 percent of the money under it is on corporate bonds and added that the increased interest forced the RBI to revise its upper limits twice. The move to allow banks to hold corporate bonds under the held-to-maturity category has met with success, she said, adding that banks are giving feedback about it giving a boost to demand for corporate bonds.