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| Deepening debt market needs to be prioritised: survey |
| Press Trust of India / Mumbai Sep 06, 2010, 22:37 IST |
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Deepening of the wholesale debt market will have to be accorded top priority, a survey said, while listing out some recommendations to further strengthen the country's financial system.
"Vibrant wholesale debt markets will enable the financial services industry assist India more wholesomely. NBFCs, who have to play a crucial role in various segments will not depend on bank finance for growth. Risks of NBFC business will not come on banking system balance-sheets," the survey prepared by Boston Consulting Group (BCG) and Indian Banks' Association, said, today.
"(The) action agenda (to deepen India's wholesale debt market) is complex because it treads across legislative, regulatory and economic issues. It requires co-ordination across regulators. Perhaps that is why the progress is slow," the survey said.
A deep debt market would help large corporate clients access even cheaper capital, it said, adding banks will find reasons to focus on the often neglected SME segment.
"Infrastructure finance from appropriate long-term sources will ease asset-liability management (ALM) risk on banks' books," the survey said.
On enhancing the economic viability of financial inclusion, the survey said that while the primary responsibility is on the banks to innovate and experiment, the government and the regulator can accelerate the evolution through interventions and encouragement in the next decade.
Transaction fee-based models are crucial to create viability, the survey said, adding computerisation of land records and easy accessibility of land for secured lending can unlock significant funds and convenience for customers.
The survey said that government payments form a significant portion of the cash flows for some of the potential customers. "The viability of the models would be enhanced if the government payouts were to be made through the banking channels for the unbanked," it said.
"The Central government has to prevail upon states to adopt the model legislation for co-operative banks in spirit and conduct elections. Nabard must introduce technology and skills into these banks," it said.
Besides, Nabard needs to be enabled as a pivotal institution for rural infrastructure, financing and development, the survey said.
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