The Working Group on the Development of Corporate Bond Market in India was formed in 2015 to address key challenges in the country’s corporate bond market, following earlier efforts by the R. H. Patil Committee (2005) and the Percy Mistry Committee (2007). It was chaired by Harun R. Khan, Deputy Governor, RBI and members included Ajay Tyagi (Additional Secretary, DEA, MOF); Praveen Garg (Joint Secretary, DEA, MOF); Pankaj Jain (Joint Secretary, DFS, MOF); Barnali Mukherjee (Chief General Manager, SEBI); S. N. Jayasimhan (Joint Director (Investment), IRDAI); Sumeet Kaur Kapoor (General Manager, PFRDA); and R. Subramanian (Chief General Manager, RBI).

Despite some progress, the corporate bond market in India remained underdeveloped, with most issuances coming through private placements (over 95 percent in 2014/15), which limited transparency and trading. The total issuance of corporate bonds increased by 236 percent, from Rs. 1.75 lakh crore in 2008–9 to Rs. 4.14 lakh crore in 2014–15, but secondary market trading lagged at about Rs. 2,000 crore per day. The group was tasked with examining gaps in the market and suggesting measures to enhance liquidity, broaden the investor base, and improve the issuance process. The lack of reissuances and a narrow investor base, constrained by high credit-rating mandates, were major factors behind low liquidity in the market.

The group noted that issuances were concentrated in shorter maturities (two to five years); and large nonfinancial corporations were often too leveraged to access bond financing. The report also highlighted the absence of key financial instruments, such as credit default swaps, and the variation in stamp duty across states, which complicated the issuance process. Foreign Portfolio Investors were allowed to invest up to Rs. 2,443.23 billion in corporate bonds, but participation was limited, partly because of some restrictions on allowing them to  invest in unlisted bonds and the restrictions on shorter-maturity bonds. While tax incentives had been introduced, the structural issues in the market had not been fully resolved, affecting investor confidence and market participation.

The committee recommended several reforms to address these challenges. It suggested consolidating bond issuances under a single security identification number, ISIN, to improve liquidity and reduce fragmentation in the secondary market. It also proposed that bond issuances follow a standardized process, with uniform yield-calculation and day-count conventions. To attract more foreign investment, the group recommended allowing Foreign Portfolio Investors to invest in unlisted debt securities and pass-through securities issued by securitization vehicles. The report also called for an electronic platform for private placements and a centralized repository for corporate bond data. Additionally, the committee advocated introducing a tripartite repo mechanism for corporate bonds, expanding partial credit enhancements for infrastructure projects, and allowing large corporations to meet a portion of their financing needs through the bond market. These measures were aimed at addressing liquidity issues, expanding the investor base, and fostering a more efficient and transparent corporate bond market.

The report led to key reforms such as allowing Foreign Portfolio Investors to invest in unlisted debt securities and implementing the Securities and Exchange Board of India’s Electronic Book Mechanism for private bond placements. While a centralized trade repository was partially established, the recommendation to use corporate bonds as collateral in the Reserve Bank of India’s Liquidity Adjustment Facility was not implemented. These measures aimed to deepen market liquidity and transparency. The committee’s proposals aimed to resolve structural barriers, improve market liquidity, and expand participation, with the broader objective of developing a more efficient and transparent corporate bond market to better meet India’s financing requirements.