The Finance Ministry will discuss with Sebi and RBI the steps required to broad-base

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and make vibrant the corporate bond market to help mid-sized firms to raise funds at competitive rates.

The ministry today discussed the issue with participants of the debt market to enlist views for widening the corporate bond market.

"Various suggestions have come (on making corporate bond market vibrant), but no decision so far. We will discuss these suggestions with Sebi and RBI," a senior finance ministry official said after the meeting.

While India has a well established government securities (G-Sec) market, the corporate bond segment is yet to pick up mainly due to the asset quality of the debt papers.

The official said the discussions were held with the representatives of financial institutions like Morgan Stanley, ICICI Securities, PNB Gilts, Tata Group and AK Capital, on the steps for boosting corporate bond market.

He said there would be another round of meeting next month with the market players to crystallise the suggestions.

Sources said the Government is mulling tax incentives such as reduction in Securities Transaction Tax (STT) and Stamp Duty, besides withdrawal of withholding tax, to help companies raise funds at competitive rates.

G-Secs are preferred over corporate bonds as they enjoy sovereign guarantee and are highly traded, as compared to bonds.

However, in comparison to G-Secs, corporate bonds offer better rate of interest and people prefer to hold them till maturity, hence there is less trading in the segment.

The official said the government is ready to put in whatever it takes to bring liquidity in the corporate bond market.

A vibrant corporate bond market, as suggested by India Inc in its August 1 meeting with Finance Minister Pranab Mukherjee, would help small and medium sized companies to get credit at comparative rates.

Large companies are able to get loan through private placement and from banks, while the smaller players face problems.