Junk bonds issuance not yet worrisome

If there is a spike in such issuances, it may add to systemic risk in case issuer ends up defaulting

Reserve Bank of India Deputy Governor Viral Acharya said in the post-policy interaction with the media that the central bank was examining “very closely” if lower-rated firms were raising bonds from the market, taking advantage of the low-interest rate scenario. While the money raised by any firm falls within its legitimate rights of doing business, if there is a spike in such bond issuances, which inevitably ends up in the hands of volume investors such as mutual funds, it may add to systemic risk in case the issuer ends up defaulting on its obligation. Recently, a few instances of that