Page 40 - Banking Finance May 2025

ARTICLE

India's Sovereign

Bond Market:

Opportunities to

re-evolve Chief Manager
Neha Nidhi

Union Learning Academy
Corporate & Treasury
Union Bank of India

Bank treasuries in India play a pivotal role in the sovereign bond market, actively trading in a
segment that dominates the country's financial landscape. Sovereign bonds, endowed with
Statutory Liquidity Ratio (SLR) status, are indispensable for institutional portfolios. These
instruments provide banks with a secure avenue to deploy surplus funds while reaping significant
coupon interest-a reliable revenue stream regardless of prevailing interest rate trends.

B ank treasuries in India play a pivotal role in the depth, and increased retail participation to sustain its

momentum.
sovereign bond market, actively trading in a
segment that dominates the country's financial
landscape. Sovereign bonds, endowed with Statutory Evolution of Public Debt in India: A
Liquidity Ratio (SLR) status, are indispensable for Historical Perspective
institutional portfolios. These instruments provide banks with
a secure avenue to deploy surplus funds while reaping The Pre-Independence Era
significant coupon interest-a reliable revenue stream In the 18th century, the financial needs of Indian princely
regardless of prevailing interest rate trends. Furthermore, states were primarily met by indigenous bankers and
their insulation from volatile market-based valuations financiers, who provided loans and credit for governance and
enhances their appeal, making them a cornerstone for military campaigns. The concept of borrowing from the
financial stability. public was introduced by the East India Company to finance
its campaigns in South India, notably during the Anglo-
The sovereign bond market boasts daily trading volumes of French wars.
approximately Rs. 50,000 crores, underlining its scale and
liquidity. In the Indian financial ecosystem, it is the 'elephant Over time, this borrowing evolved into what is known today
in the room'-overshadowing higher-yield but riskier as public debt, where the government borrows money from
securities. Its intrinsic role in funding economic growth has the public or financial institutions. Towards the late 18th
cemented its dominance, a status achieved through a century, the East India Company sought to establish
century-long evolution and adaptation. However, the bond government banks to raise funds more effectively. These
market today is at a crossroads, calling for innovation, banks were precursors to central banks and aimed to

36 | 2025 | MAY | BANKING FINANCE