India's Corporate Bond Market To More Than Double by 2030, Says Crisil

India's corporate bond market is expected to more than double in next six years on higher infrastructure bond issuances, Crisil Ratings said in a statement on Monday.

Crisil Ratings expects the outstanding size of India's corporate bond market rise to Rs 100-120 lakh crore by FY30, from Rs 43 lakh crore in the last fiscal, the release said.

The growth will be driven by multiple factors like rising capital expenditure in infrastructure, attractiveness of infrastructure sector for the corporate bond investors, and growth in retail credit, said Somasekhar Vemuri, senior director, Crisil Ratings.

Currently, infrastructure constitutes only 15% of the annual corporate bond issuance by volume, the rating agency said. "But structural improvements aided by a raft of policy measures should make infrastructure bond issuances amenable to patient-capital investors — insurers and pension funds — the key investor segment in the bond market."

Corporate bonds are expected to finance a sixth of capital expenditure "foreseen".

Despite high retail credit growth, it accounts for only 30% of the gross domestic product, Crisil said. This is lower than the 54% GDP contribution in the U.S.

"The bond market, being a key funding source for the larger NBFCs and accounting for a third of the funding mix, will play an important role in funding retail credit flow," Crisil added in its statement.

Additionally, the Reserve Bank of India's latest guidelines raising risk weights for some consumer loans will push non-bank lenders to increase bonds in their funding mix.

With increasing financialisation of India's household savings portfolio, through insurance, mutual funds, retirement funds, alternative investments and portfolio management services, a higher portion of these funds will flow toward the bond markets. Managed investments grew at a compounded annual growth rate of 16% over the last five years, compared to a 10% growth rate in bank deposits.

"Crisil estimates assets in the managed investment segment to double to Rs 315 lakh crore by fiscal 2027, and the trend is expected to continue well past fiscal 2027," the rating agency said.