Debt market is divided into two parts, secondary market and primary market. New instruments are issued in the primary market by various participants. The market for bonds and securities are bought and sold is called secondary debt market. The securities are already issued by the companies and these securities are traded in this market. The secondary market is again divided into wholesale market and retail market. Wholesale debt market comprises of institutions and agencies such as banks, financial institutions,
RBI, primary dealers, insurance companies, provident funds, mutual funds corporate entities and foreign institutional investors. The two types of transactions are executed in a wholesale debt market i.e. an outright sale or purchase and a repo trade. The retail debt market comprises individual investors, small trusts and other legal entities.
No public or rights issue of debt instruments shall be made unless credit rating from a credit rating agency has been obtained and disclosed in the offer document. In case of issue of debentures with maturity of more than 18 months the issuer shall appoint a debenture trustee. A company has to create Debenture Redemption Reserve in case of issue of debentures with maturity of more than 18 months. The issuer company shall redeem the debentures as per the offer document. If the issuing company proposes to create a charge for debentures of maturity of less than S months, it shall file with the
Registrar of Companies particulars of charge under the Companies Act. A letter of option containing disclosures with regard to credit rating, debenture holder resolution, option for conversion, justification for conversion price and such other term which the Board may prescribe from time to time shall be filed with the Board through an eligible merchant banker in case of non-convertible debentures and partly convertible debentures.