In fact, e-commerce makes information sharing less costly, and hence it is easier to develop bond market infrastructure in the current environment for facilitating transparent market-based allocation of credit. It may be difficult for Government to intervene through debt market for directed subsidised lending as compared with the banking system. Hence, it is claimed that debt markets facilitate the reduction of bad loans.
Furthermore, since debt instruments are mostly rated, investor awareness and monitoring is greater, which mitigates the moral hazard arising out of deposit insurance as in the case of banks. Third, debt market can help develop the derivatives market thereby facilitating hedging mechanisms and enabling greater diversification of risks by participants.