Insurance firms may get to invest in infra bonds for shorter period

In a bid to develop the corporate bond market, insurance companies may be allowed to invest for a shorter period in infrastructure bonds. Also, these firms, along with mutual funds, may be permitted to act as market makers in the bond market.

“The Financial Stability and Development Council (FSDC), in its meeting recently, discussed various measures for development of the corporate bond market. Issues such as investment for shorter period and market makers, among others, were suggested. Now, the authorities concerned have to take a decision,” a highly placed Government source told Business Line.

Apart from relaxing investment norms, it was also suggested that the minimum tenure restrictions for insurance companies in infrastructure bonds need to be reduced to five years from 10 years at present. “Now, the insurance regulator, IRDA, has to take a decision and finalise the guidelines,” the source added. In the meeting, the insurance regulator was represented not by its Chairman, but by a member, R.K.Nair.

A statement issued by the Finance Ministry after the meeting said that the Council also discussed steps to be taken to rationalise the framework for regulation of corporate debt to remove constraints for issuers and protect investors, encourage participation of long- term investors, reduce the cost of public issuance and increase liquidity through improving market infrastructure.

A suggestion was also made for rationalisation of stamp duty. It may be noted that a proposal for uniform duty Act has been under consideration for long. Since stamp duty is a State subject, the rate has to be agreed upon by all the States concerned. The Finance Ministry has claimed that all the States are on board on this issue.