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Indian Debt Market

Primary market

Primary market is that market where the debt instruments are issued for the first time . Which can be issued as follows –

Public prospectus: invites public to buy

Private placement: Invites few selected individuals, as the cost of public issuing is quite a large

Rights issue: to the already exciting members, but they can refer to their beneficiaries in case of unwillingness to buy

However, the issuer has to inform the exchanges in case of issuing debts. To notify the investors, about associated risk changes

Secondary market

Secondary market is where the debt instruments can be traded. It can take place by the following two ways based on the characteristics of the investors and the structure of the market are :

Wholesale debt market segment of NSE & Over the counter of BSE : Where the investors are mostly Banks , Financial Institutions , RBI , Primary dealers , Insurance companies , Provident Funds , MFs , Corporates and FIIs .

Retail debt Market: involves participation by individual investors, small trusts and other legal entities in addition to the wholesale investor’s classes.

Types of debt Instruments

Government Securities

  • It is the Reserve Bank of India that issues Government Securities or G-Secs on behalf of the Government of India.
  • These securities have a maturity period of 1 to 30 years. G-Secs offer fixed interest rate, where interests are payable semi-annually.
  • For shorter term, there are Treasury Bills or T-Bills, which are issued by the RBI for 91 days, 182 days and 364 days

Corporate Bonds

  • These bonds come from PSUs and private corporations and are offered for an extensive range of tenures up to 15 years.
  • Comparing to Government Securities, corporate bonds carry higher risks, which depend upon the corporation, the industry where the corporation is currently operating, the current market conditions, and the rating of the corporation

Certificate of Deposit

  • Certificate of Deposits (CDs), which usually offer higher returns than Bank term deposits, are issued in Demat form
  • Banks can offer CDs which have maturity between 7 days and 1 year.
  • CDs from financial institutions have maturity between 1 and 3 years

Commercial Papers

  • There are short term securities with maturity of 7 to 365 days.

Structured Debt

  • Structured debt is some type of debt instrument that the lender has created and adapted to fit the needs and circumstances of the borrower.
  • A debt package of this type usually includes one or more incentives that encourage the debtor to do business with the lender, rather than seeking to develop a working relationship with other lenders.
  • While the overall structure of the debt is adapted to the needs of the borrower, the terms also benefit the lender in the long term.
  • The main goal of structured debt is to create a debt situation that provides the debtor with as many benefits as possible, while also keeping the overall debt load as low as possible
  • At the same time, the lender receives an equitable return for the structured debt arrangement
Types Issuers Instruments
Government Securities Central Government :
State Government :
1. Zero Coupon bonds
2. Coupon bearing bonds
3. Treasury bills
4. Floating rate bonds
5. STRIPs
1. Coupon bearing bond
Public sectors bonds Government agencies , statutory bodies , public sector undertakings 1. Debentures
2. Government guaranteed bonds
3. Commercial papers
4. PSU bonds
Private sector bonds Corporates : 
Bank :
Financial Institutions :
1. Debentures
2. Commercial papers
3. Fixed floating rate
4. Zero coupon bonds
5. Inter-corporate deposits
1. Certificate of debentures
2. Debentures
3. Bonds
1. Certificate of deposits
2. Bonds

 

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