Mumbai, Sep 27 (IANS) Accommodative monetary policies followed by central banks in the developed economies deter international investors from the bond market, the market regulator said on Tuesday.
"Given the volatile nature of capital flows, any sneezing by the central banks can create wide fluctuations in the bond market," Securities & Exchange Board of India (Sebi) Chairman U.K. Sinha said, addressing a summit here on ways to develop the bond market in the BRICS (Brazil, Russia, India, China, South Africa) group of emerging economies.
"A bond market can only develop if there is international interest in the bond market, but the easy money policies and negative interest rates in some markets are creating uncertainties," Sinha observed.
Incidentally, the Sebi chairman's views are similar to those of the Reserve Bank of India's new Governor, Urjit Patel, who took charge earlier this month.
Patel had voiced his views on monetary policy when the previous RBI Governor, Raghuram Rajan, had held rates in the February 2015 review after making an unexpected rate cut the previous month -- the first in nearly two years.
Patel had elaborated on the "important backdrop" to Rajan's move to hold interest rates, saying: "We are in the midst of the age of competitive depreciation and of a beggar-my-neighbour philosophy. It brings to mind an old African saying that when elephants fight, the grass suffers."
"While the ECB (European Central Bank) and the Bank of Japan are printing money and devaluing their currencies, the US economy is reviving. Anyone in the middle is getting crushed," he had said referring to the accommodative fiscal policies adopted by .
Sinha, on Tuesday, also noted the problem in transmission of unconventional monetary policies to the private sector.
"The broad money supply from 2007 has increased by more than $9 trillion, but the actual flow to the private sector is only $1.8 trillion," he said.
The Sebi chief also pitched for easier taxation norms for the corporate bond market.
"Taxation on income from bond market is rather high and that will be a issue. There is a need to have a relook at it," Sinha said.
He suggested that there is a need to have a uniform rate for stamp duty across the country.
"There is an element of uncertainty about whether a particular rate of stamp duty that an issuer has taken into consideration will continue or there will be a negative surprise," he said.
According to Sinha, the total amount raised via fresh issues of private placement of bonds during the last financial year was at $75 billion.
With India assuming the chairmanship of BRICS for 2016, its Department of Economic Affairs has organised this conference in partnership with the Confederation of Indian Industry.
A key agenda is to foster cooperation among BRICS in the development of financial markets, the Indian finance ministry said in a statement.
A deep and vibrant bond market provides governments and corporate with an alternative and cost effective source of debt funding which is vital for the economic growth and stability.
