India’s market for corporate bonds has been a laggard: Heed Niti Aayog’s call for reforms

India’s capital markets have grown by leaps and bounds since 1991, when economic liberalization began. Be it in terms of participation or infrastructure, they now compare with the best in the world. But this boom has been all but stolen by the equity market.When it comes to the market for debt, especially corporate bonds, ours lags woefully behind those of not just advanced countries, but many of our peers as well.

Globally, the bond market is much larger ($140 trillion) than the equity market ($115 trillion). But India is an exception. Not only is our debt market dominated heavily by government securities (G-Secs), the value of all outstanding bonds is just 50-60% of the country’s equity market capitalization.True, our market for corporate bonds has grown in recent years.

However, as a Mint report indicates, a large slice of bonds issued by companies goes unlisted; according to data from Primedatabase, in 2025 up to 9 December, private firms raised nearly ₹8.6 trillion via bonds listed for trading and a bit above ₹2 trillion through unlisted paper. Ironically, we do have what it takes for a bond market to thrive: notably, a well-developed market for G-Secs that offers a benchmark yield curve for bond pricing, a legal framework, a trusted depository system and credible rating agencies. Our challenge has been to enlarge corporate issuances, given that banks cannot adequately fulfil the need for long-term finance.

Bank deposits are repayable on demand, but loans have longer tenures, which results in an asset-liability mismatch that constrains lending for long spans of time. Corporate bonds could fill this gap. Ever since the pandemic, though, privately placed issuances have surged.