India's market regulator will allow exchange-traded interest rate futures in January, and will permit exchange trading of corporate bonds to help firms raise funds locally at cheaper rates, a senior official said on Monday.
"We are on track to launch interest rate futures. It will be launched by January," T.C. Nair, a whole-time member of the Securities and Exchange Board of India (SEBI) told an industry conference.
"We are looking at an exchange-traded corporate bond market because there is more transparency and clearing of settlements," he said, adding such bonds would find appetite among investors as interest rates are softening.
The regulator is waiting for state governments to agree on a uniform stamp duty rates for such bonds, he added.
India has been trying to introduce exchange-traded bonds for three years to enable companies to raise long-term funds for big projects.
India needs $500 billion investment in infrastructure sector in the five year period ending March 2012 with significant private participation, but the recent global credit crisis has dried up funds abroad.
The government and central bank announced a series of steps over the weekend including cuts in key central bank rates, a cut in excise duties on manufactured products and a $4 billion extra spending to pump-prime the economy.
Nair said the daily over-the-counter trade in corporate bonds ranges between 3 and 4 billion rupees, and this could increase with the participation of retail investors.
Outstanding private placements in corporate bonds was to the tune of 1.2 trillion rupees, but they are not traded regularly.
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