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NK Singh: Deep Bond Market Key to Freeing Up Bank Resources for Infrastructure

NK Singh stated that developing a deep bond market is crucial to restructure India's financial resources for infrastructure. This would free up commercial banks to focus on their core lending activities. Singh highlighted the Finance Minister's announcement of a new banking committee as a step towards structural changes. He suggested the committee should consider revisiting priority sector lending norms to unlock financial resources.

Key Points: NK Singh: Deep Bond Market Key for Infrastructure Finance

  • Deep bond market needed for infrastructure financing
  • Frees up commercial bank resources for other lending
  • Finance Minister announced new banking committee
  • Committee may revisit priority sector lending norms
2 min read

Deep bond market essential to decouple infrastructure financing from commercial banking: NK Singh

NK Singh says a deep bond market is essential to decouple infrastructure financing from commercial banks, freeing up resources for other sectors.

"The need to develop a deep bond market so as to free up the resources of the commercial banks and use the deep bond market to finance the infrastructure - NK Singh"

New Delhi, May 12

NK Singh, President of the Institute of Economic Growth and former Chairman of the 15th Finance Commission, stated that developing a deep bond market is necessary to restructure India's financial resources.

Speaking to the media on Monday, Singh explained that the development of a bond market stands out as a solution to the long-term financing needs of the infrastructure sector. By shifting this burden away from commercial banks, the financial system can avoid the foreclosure of resources that often hampers credit flow to other sectors of the economy.

"Along with some of the other measures that foreclose a large part of our resources, the need to develop a deep bond market so as to free up the resources of the commercial banks and use the deep bond market to finance the infrastructure, whereas the commercial banks would then concentrate on the other banking lending activity," Singh stated.

Singh noted that the banking sector remains central to the national growth trajectory. He pointed out that the Union Finance Minister signaled a commitment to structural changes during her budget speech by announcing the formation of a new banking committee.

"The major highlight was the fact that banks play a vibrant role in India's growth trajectory. By the availability of capital, cost and efficiency of financial intermediation, bringing about the next steps on the reforms of the banking sector, the Finance Minister, in her budget speech, announced the constitution of a new banking committee," Singh said.

According to Singh, the committee may also need to revisit existing frameworks that currently lock up significant financial resources.

"Some of the issues which we discussed could constitute the areas where this committee could look into. The chairman of the Prime Minister's Economic Advisory Council, Mahendra Dev, in a very learned article two days ago, pointed out that some of the areas like the norms of priority sector lending, what should constitute priority sector lending, could be a subject which this committee should consider," Singh added.

In addition to technical financial reforms, Singh "also felt that the speeches of both Chandrababu Naidu and Yogi Adityanath were very far-reaching and visionary."

- ANI

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Reader Comments

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Priya S
Makes sense logically but implementing this in India is easier said than done. Our bond market is practically non-existent outside government securities. Retail investors have no trust in corporate bonds. Need to fix the regulatory framework first, then maybe we'll see some traction. One step at a time, I suppose.
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Rohan X
NK Singh is a visionary but the real challenge is the risk appetite of Indian investors. We still prefer gold and real estate over financial instruments. Unless the government provides some guarantee or tax incentives for infrastructure bonds, this will remain a pipe dream. Also, how are we going to rate these bonds? CRISIL and ICRA need major overhaul.
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Ananya R
Not just infrastructure - our entire financial architecture needs restructuring. Commercial banks are being forced to lend to priority sectors, then to government bonds, and then to infra - where is the credit for small businesses and startups? Singh is bang on. Decouple the system, let each institution do what it does best.
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Sarah B
Interesting proposal but countries like US and UK have highly developed bond markets because they have strong institutional investors (pension funds, insurance companies) with long-term horizons. India's insurance and pension sector is still nascent. Building the bond market will require parallel development of these institutions. Patience needed.
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Deepak U
NK Singh has been consistently right on fiscal matters. But I worry about the political will. The government wants quick results - bond markets take years to mature. Also, the mention of Naidu and Yogi's speeches being visionary is interesting. Wonder if there's a political angle to this committee formation. Anyway, good for the economy ultimately.

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