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India’s corporate bond market has grown steadily over the past decade, but a closer look shows that it still plays a smaller role than it ideally should.
According to NITI Aayog’s own data, outstanding corporate bonds have risen from around ₹17.5 trillion in FY2015 to about ₹53.6 trillion in FY2025, an annual growth of nearly 12 percent.
Even with this growth, corporate bonds make up roughly 14 -16 percent of India’s GDP, which is much lower than levels seen in markets like South Korea (around 79 percent) or Malaysia (around 54 percent). Another way to see this is in absolute market share. India accounts for only about 3 percent of the global corporate bond market, whereas the U.S. and China together make up over half of it.
One reason for this limited scale is that most bond issuance in India happens via private placements, which are usually accessible only to institutional investors and not easy for retail investors to access. In fact, about 96 percent of outstanding corporate bonds are held by institutions such as mutual funds, insurers, banks and pension funds.
Retail participation remains quite low, even though regulators have reduced minimum investment sizes and introduced online platforms to improve access.
In simple terms, while the corporate bond market in India exists and is growing, it still lags behind many global peers in depth, accessibility and retail involvement, which limits its effectiveness as a mainstream source of corporate funding.
Why India Needs a Stronger Corporate Bond Market
After looking at where India’s corporate bond market stands today, the next obvious question is why does this matter so much right now?
The Problem With a Bank-Dominated Funding System
In India, most companies still depend heavily on banks for borrowing. Nearly two-thirds of corporate financing comes from bank loans, while bonds play a much smaller role. This creates three problems:
- Pressure on banks: Banks end up carrying most of the credit risk. When economic cycles turn or bad loans rise, the entire system feels the strain.
- Limited long-term funding: Banks mainly rely on short- to medium-term deposits. But infrastructure projects, green energy, manufacturing expansion and urban development need long-term capital of 10–20 years or more.
- Higher borrowing costs for companies: When banks dominate lending, pricing power stays concentrated. A deeper bond market introduces competition and can lower funding costs for well-rated companies.
Why Bonds Are Better Suited for Long-Term Growth
A strong corporate bond market allows companies to:
- Match long-term projects with long-term money
- Diversify funding instead of relying on one source
- Raise capital without putting pressure on bank balance sheets
- For the economy, this means risk gets distributed, not concentrated.
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How NITI Aayog Has Structured the 6-Year Roadmap
Instead of trying to fix everything together, NITI Aayog has broken the roadmap into three clear phases. Think of it as laying the foundation first, then strengthening and finally scaling.
Phase 1: Years 1-2
Fixing the Basics and Removing Friction
The first two years focus on solving structural and operational gaps that slow the bond market down today. Key priorities in this phase include:
- Improving ease of issuance so companies find bonds simpler than bank loans
- Strengthening disclosure and reporting standards for better transparency
- Streamlining regulations to reduce complexity across regulators
- Improving access to bond markets through digital and exchange-based platforms
Phase 2: Years 3-4
Building Depth and Market Confidence
Once the basic structure is in place, the focus shifts to depth and participation. This phase looks at:
- Expanding the issuer base beyond top-rated companies
- Encouraging market makers to improve secondary market liquidity
- Bringing in more institutional investors with longer investment horizons
- Developing better credit risk assessment and pricing mechanisms
Phase 3: Years 5–6
Scaling the Market for Long-Term Growth
The final phase is about scale and maturity. Here, the focus is on:
- Making corporate bonds a mainstream funding option, not a niche one
- Supporting longer-tenure bonds for infrastructure and development projects
- Improving retail participation through awareness and simplified access
- Aligning India’s bond market closer to global standards
Final thought: What NITI Aayog Expects by 2030
One of the key goals of NITI Aayog’s 6-year roadmap (Deepening the Corporate Bond Market) is to make India’s corporate bond market much larger and more productive by the end of the decade. According to the report, India’s corporate bond market could more than double in size, reaching around ₹100–120 trillion by 2030 if deep structural reforms and improved participation take place.
To put this in perspective:
- In FY2025, outstanding corporate bond outstanding stood at about ₹53.6 trillion, growing at roughly 12 percent per year over the last decade.
- The projected ₹100–120 trillion figure by 2030 implies a continued push toward much broader market depth, investor participation and corporate funding through bonds, not just bank loans.
Frequently Asked Questions on NITI Aayog’s Roadmap
1. What does NITI Aayog mean by “deepening the corporate bond market”?
NITI Aayog’s goal is to expand India’s corporate bond market from ~₹53–55 trillion today to ₹100–120 trillion by 2030. Deepening means increasing issuer participation, investor base and secondary market liquidity, not just growing outstanding bonds. Today, over 70% of issuances come from AAA-rated issuers, which the roadmap aims to change.
2. Why is India reducing dependence on banks for corporate funding?
Currently, banks account for over 60% of corporate credit, while corporate bonds form only ~18–20% of GDP, compared to 40–50% in developed markets. This concentration increases systemic risk. A deeper bond market spreads long-term financing across investors instead of banks alone.
3. How does the 6-year roadmap improve bond market liquidity?
The roadmap targets higher secondary market turnover, which is currently less than 1.5 times outstanding bonds annually. Measures across the 6-year phased plan (Years 1–2, 3–4, 5–6) focus on market-making, standardized issuances and improved trading infrastructure to boost tradability.
1 comment
Excellent post Mr Roy. Keep it up. Concise but reader-friendly explanation.
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