India's Bond Lending Plan Stalled by Tax Uncertainty, Deepening Debt Market Impact
Business
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Moneycontrol•30-01-2026, 21:37
India's Bond Lending Plan Stalled by Tax Uncertainty, Deepening Debt Market Impact
- •India's plan to allow sovereign bond lending and borrowing is stalled due to unresolved tax application issues, despite infrastructure being ready for over 18 months.
- •No trades have occurred on the portal established in July 2024 by the sovereign debt clearing house, as market players await clarity on GST responsibility.
- •The issue, particularly regarding the reverse charge mechanism for tax, has been discussed in meetings of the Clearing Corporation of India Ltd. and its members.
- •The Reserve Bank of India announced the initiative in February 2023 to enhance trading liquidity and allow investors like insurers to utilize debt holdings.
- •Thin trading, especially in long-tenor bonds, has led to yield spikes and increased borrowing costs, with the 10-year paper dominating volumes.
Why It Matters: Tax uncertainties are stalling India's sovereign bond lending plan, hindering debt market deepening and liquidity.
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