India needs to direct more insurance and pension savings into bond markets and encourage greater foreign participation in debt in order to finance its infrastructure building plans, said State Bank of India chairman Dinesh Kumar Khara.
“The long-term liabilities with the insurance and pension sector can be channelised into the capital markets,” he said. “As of now, they are [investing] only in ‘AA’ and AAA-grade paper. But they can also be made available to lower-grade paper,” Mr. Khara added.
“That should make the debt market more vibrant and is perhaps the need of the hour. If at all we have to create infrastructure, we have to make sure this money flows into infrastructure,” he said, adding that the funding requirements of the economy, including ₹100 lakh crore of infrastructure investments, can only be met if capital markets are opened up further.
“We have started seeing some foreign participation in debt instruments in the current year as a lot of steps were taken to shore up international investors’ confidence. But this is a beginning and we have a long way to cover,” the SBI chief said at a CII event on Tuesday.
Also, even a new development finance institution (DFI) would need more international funds, Mr. Khara said.
“The earlier avatar of DFIs, got most funds from government... it was essentially domestic” savings, he said, adding that alone would be inadequate now.
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