The key participants in the Indian Debt markets are:
The Central and the State Government need money to manage their short term and long term finances and fund budgetary deficits. Being the largest issuers in the Indian Debt markets, they raise money by issuing bonds and T-bill of different maturities.
Reserve Bank of India (RBI)
As a banker to the government, the RBI has a key task of managing the borrowing program of the Government of India. It has the Money market and the G-Secs market under its purview. Apart from its regulatory role it also performs several other important functions such as controlling inflation (by managing policy / interest rates in the country), ensuring adequate credit at reasonable costs to various sectors of the economy, managing the foreign exchange reserves of the country and ensuring a stable currency environment.
The SEBI acts as the regulator for the corporate debt market and the bond market wherein the entities raise money from the public through public issue. The regulation comprises of manner in which the money is raised and tries to ensure a fair play for the retail investor. It forces the issuer to make the retail investor aware of the risks inherent in the investment, through its disclosure norms. SEBI also regulates Mutual Funds and the instruments in which these mutual funds can invest. Investment from Foreign Institutional Investors (FIIs) also falls under the SEBI’s scanner.
Primary Dealers (PDs)
Primary Dealers (PDs) are market intermediaries appointed by RBI who underwrite and make market in government securities by providing two-way quotes, and have access to the call and repo markets for funds.
Banks are the largest investors in the debt markets, particularly the government securities market due to SLR requirements. They are also the main participants in the call money and overnight markets. They issue CDs and bonds in the debt markets and also arrange the CP issues of corporates.
The other participants in the Indian debt markets are:
- Financial Institutions
- Mutual Funds
- Provident & Pension Funds
- Insurance Companies
While financial institutions and corporates issue short and long term fixed income instruments to meet their financial requirements. Insurance companies and Mutual Funds along with Provident & Pension Funds are also the other large investors in the Indian debt markets who invest significant amount mobilized from their investors.