Debt markets for development

Reforms in infrastructure strategy, bank governance and debt markets needed to prevent future NPA traumas

Policy makers are struggling with several problems that can be attributed to one core deficiency — the failure to develop a rational policy framework and an effective term finance system for long gestation infrastructure projects. The rising problem of non-performing assets (NPAs) in banks, the stagnation in investment intentions and the viability woes of the investors seduced by public private partnerships (PPPs) are linked to this key gap in capital markets.

Infrastructure projects pose a real challenge for immature capital markets. Their fund requirements are very large relative to the scale at which untied loanable funds are available. They operate in