HDFC Bank chairman Atanu Chakraborty on Wednesday called for deepening bond markets to facilitate efficient financing of India’s energy transition goals, warning that resorting to bank finance for long gestation projects would lead to the sort of disasters the country saw in the first decade of the 2000s.
“I see just a beginning of [reforms in financing and bond markets] with the Indian government securities becoming a part of global indices. However, a lot needs to be done downstream for corporate bonds, developing a deeper market so that investors can really invest in them and get out of them,” Mr. Chakraborty said.
“Only then really the financing of these kind of long-term projects will happen. Otherwise, with very short-term finances that banks have, we can only have disasters like we saw in the first decade of this millennium,” the HDFC Bank chief said, noting that more investors in corporate bond markets will also reduce the volatility in such bonds’ yields. KPMG estimates that India will need an average of $350–400 billion annually by 2047 to meet its clean energy ambitions.
Speaking at KPMG’s energy and resources conclave ENRich 2023, Mr. Chakraborty also pointed to the need for some multilateral finance or guarantees “which are very difficult to provide for governments because of the contingent liabilities that they bring along”, to finance new types of energy projects which may not be completely proven yet. Possibly, some bonds or “more elegant solutions” could be worked out, he said.
He also underlined the need to understand risks associated with new energy sources that are often papered over in the green transition narrative. “Everything that glitters is not always gold. Unless the risks are also brought forth… when things really hit us in the face, the faith in those products really goes away. So it’s important that we look at the downsides as well,” Mr. Chakraborty concluded.
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