Referring to long-term finance requirement of infrastructure projects, Finance Minister Pranab Mukherjee today said development of the debt market in India is absolutely vital.
"Some projects need long-term rupee denominated bond. The present financing channels are not suited to address this problem. It puts pressure on the banks with long-term assets and going aboard increases currency risks as revenue is in
rupee," Mukherjee told members of the Indian Institute of Company Secretaries.
Bonds helps an entity to raise long-term capital which is required in case of infrastructure projects generally having a gestation period of more than five years.
At present, debt market in India is, however, shallow and the government is making efforts to widen it. As far as secondary debt market is concerned, it is lacking in the country.
"It has been estimated in a Planning Commission paper that we need to invest USD 495-500 million between now and 2012 to ease shortage of infrastructure and that a substantial part of this would have to come from these markets," he said.
Mukherjee said a liquid, well-functioning G-Sec market with modern institutional structure was under way.
India, he said, was committed to reforming the process even after the recent global financial crisis.
"We are in process of taking out next generation financial reform. Two important powered expert committees on making Mumbai an international financial centre and a high level committee on financial reform have submitted their reports in the recent past," he said.