new delhi the government needs to set the debt market right the muchneeded efficient market for credit that benefits all needs deep reform without a strong market for borrowing we will not be able to meet the investing publics need for regular incomelets consider what is broken we have the government which borrows systematically to fund budget deficits once this lending was available on tap in the 1970s banks lent almost half their deposits to the government and the rbi issued tbills at 45 to fund the government we suffered double digit inflation and tremendous damagein the 1990s this market was reformed and the government was asked to borrow at market rates through auctions however the government can still tap banks insurance companies provident funds trusts and many such set ups whose guidelines requires them to lend to the governmentthis market for borrowings is virtually guaranteed by the government and represents the base rate in the economy keeping this market structurally efficient and ensuring the rate is representative of the cost of funds for the government is fundamental two systems of privilege hit that objectivethe first are the slew of government saving schemes whose interest rates are not market driven the second is the interest rate declared by the epfo this is one holy cow no one will touch so we have different versions of the borrowing rates for the governmentthankfully the second rung of institutions in the system that fed off the privilege of access to government coffers is mostly dead the erstwhile financial institutions that were set up to develop the industrial sector simply took government money and made it available to borrowersthe third rung is the banking system the psu banking system represents the privilege and entitlement that needs to go no one is entitled to a job in the government bank nor is it anyones money to give away to the privileged and unscrupulous these are businesses that need accountability the primary credit delivery system needs sound lending practices thankfully there is competition in the sector to show where efficient practices liewhile the banking system was hurting from the burden of bad debt nbfcs took on demand for loans and began to route the lending through their books we now have a high risk balance sheet problem at nbfcswe seem callous about fragile markets for credit consider the history of lending institutions and we have evidence to show how broken our credit systems have been for too long whether it is fixed deposit scams the chit fund fraud the micro finance meltdown the fmp fiasco or the banking npa crisis we see poor management of credit irresponsibility with other peoples money lack of checks and balances and crumbling of institutions from greedwe have no system of gatekeeping to ensure that good quality borrowers access the markets we have lenders without accountability we have credit appraisal systems that can be circumvented we have no markets for credit rating migration we have poor recovery systems we are still