Debt markets are a critical source of funds for a developing economy like India. The Debt securities market in India is amongst the largest in Asia. It includes government securities, the largest component and bonds issued by public sector undertakings; other government borders financial institutions, banks and computers. Debt markets are now considered an alienate route to banking channels for finance.
Debt Securities Market in India
If we talk about the debt securities market in India then we need to divide the market into separate markets. So, we will divide the market in below sections:
Market Segment in India for Debt Securities
There are two segments in the debt market in India. These segments are discussed below:-
1. Government Securities Market
2. Corporate Debt Securities Market
1. Government Securities Market
It is the oldest and most dominant part of the debt known in India. It is also known as a Gilt-edged market because the government securities are fixed full as the government does not default on its payment. The market for government securities comprises the securities issued by the central govt., State govt., state sports or entities. The Central Govt. mainly mobilizes funds by ensuring dated securities and T-bills, while the state government relies solely on state development loans.
Characteristics Of Govt Securities Market
- The Central and state govt. issue their securities.
- Reserve Bank Of India also possesses these securities and uses them as an employment entitlement in monetary control.
- These securities have a fixed rate of interest.
- Govt. securities have a fixed maturity period.
- This market was limited to institutional envelopes. In 2001, RBI allowed the entry of individuals also.
- Investment in these securities is exampled from wealth loan subject to the limits specified in the wealth tax act.
- This is an over-the-condor market, and each sale and purchase must be negotiated separately.
- In 2002, the RBI allowed related trading in G-secs through SEBI-registered boleros.
2. Corporate Securities Market
The Indian corporate sector relies, to a great extent, on raising capital through debt issues which compare bonds and commercial heapers. Most of the bonds are structured to suit the requirements of investors and the issuers and include a variety of tailor-made fractures concerning enlisted payments. The redemption corporate board market has seen a lot of innovations, including securities products, corporate bond strikes, and a variety of floating rate instruments with floors and caps.
Regulatory Framework in Debt Securities Market in India
In January 2007, the regulatory jurisdiction and market. The government classified the design for corporate bonds. The agency responsible for different segments of the corporate debt markets is:-
- SEBI will be responsible for the primary market for corporate debt.
- RBI will be responsible for the market for repot recreate repo transactions in corporate debt.
- SEBI will be responsible for the secondary market (OTC and Exchange) for corporate debt.
- The above framework would apply irrespective of the parties evolved in a transaction.
- The views regarding unlisted trading securities and devalues on the corporate debt would be taken as and when the need abases.
Participants in Debt Securities Market
Corporate debt securities include corporate bonds, commercial hopes, certificates of deposits insured by companies, banks, and PSUs Financial Institutions (FIs). The major participants are:-
- Banks
- Companies
- Mutual funds
- NRIS
- Corporate
- Trusts
- Individuals
- Associations
- Financial Institutions