Proper regulatory environment

High liquidity

High level of institutional participation

Lower spreads

Speculative aspect is available

Risk return tradeoff balances equally.

Our recommendations with regard to the above points are as follows: -

For the regulatory requirements aspect, the following steps are recommended: -
1. Firstly, this market requires strict monitoring so it needs a separate regulator.
2. Maximum capital at risk limit needs to be set up for exposure by Banks and Financial Institutions. We recommend equity like structure of 5% for the beginning.
3. The capital at risk needs to be provided @ 25% considering global default rates and recoveries. (Annexure Altman)

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* Contributed by -
Saurabh Joshi & R. T. Sivasubramaniyan,
PGDM - II Finance,
SCMHRD, Pune.