Ppt 4

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Unit IV: Debt Markets - Introduction, History of Indian debt market, Debt market participants, Primary and secondary segment, The private Corporate debt market, The public sector undertaking bond market, The government securities Market, Issuance mechanism – auction, sale, private placement; Trading system, SGL A/c, PD system, steps to develop debt markets.

Refer FIMMDA material Chapters – 1, 2,3,5,7,11 & 12

Financial Institutions & Markets – L.M.Bhole; 4th Edition

OBJECTIVE of the OBJECTIVE of the SESSIONSESSION

To understand what is meant by Debt & To understand what is meant by Debt & Debt marketDebt market

How has the Debt market evolved in How has the Debt market evolved in IndiaIndia

Debt Market Segments & ParticipantsDebt Market Segments & Participants Government Securities (G-Sec) MarketGovernment Securities (G-Sec) Market PSU Bond MarketPSU Bond Market Private Corporate Debt MarketPrivate Corporate Debt Market Issuance Mechanism & Trading SystemIssuance Mechanism & Trading System Securities General Ledger Account & Securities General Ledger Account &

Primary Dealer SystemPrimary Dealer System Steps to Develop Debt MarketsSteps to Develop Debt Markets

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DEBT & DEBT MARKETDEBT & DEBT MARKET Bonds & Shares form part of the capital Bonds & Shares form part of the capital

markets.markets. Shares are Shares are equity capitalequity capital while bonds are while bonds are

debt capitaldebt capital.. A bond is a debt capital market instrument A bond is a debt capital market instrument

issued by a borrower, who is then required issued by a borrower, who is then required to repay to the lender/investor the amount to repay to the lender/investor the amount borrowed plus interest, over a specified borrowed plus interest, over a specified period of time.period of time.

Bonds are also known as Fixed Income Bonds are also known as Fixed Income Instruments & Dated Securities.Instruments & Dated Securities.

Term to maturity is usually more than one Term to maturity is usually more than one year; Debt which are issued for less than a year; Debt which are issued for less than a year are considered to be year are considered to be Money Market Money Market DebtDebt..

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DEBT & DEBT MARKETDEBT & DEBT MARKETTechnically speaking, Debt instruments are Technically speaking, Debt instruments are contracts in which:contracts in which:

one party lends money (i.e., principal) to one party lends money (i.e., principal) to anotheranother

on pre-determined terms w.r.t. rate of on pre-determined terms w.r.t. rate of interest (i.e., interest (i.e., coupon)coupon)

to be paid by the borrower to the lender,to be paid by the borrower to the lender, the periodicity of such interest payment, the periodicity of such interest payment,

andand the repayment of the principal amount the repayment of the principal amount

borrowed (i.e., borrowed (i.e., either in installments or in either in installments or in bullet on maturity).bullet on maturity).

In the Indian securities markets, we generally use In the Indian securities markets, we generally use the term ‘the term ‘bondbond’ for debt instruments issued by the ’ for debt instruments issued by the Central and State governments and public sector Central and State governments and public sector organizations, and the term ‘organizations, and the term ‘debenturesdebentures’ for ’ for instruments issued by private corporate sector.instruments issued by private corporate sector.

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DEBT MARKET DEBT MARKET SEGMENTSSEGMENTS

Three main segments in the Indian Debt Market Three main segments in the Indian Debt Market are:are:

Government SecuritiesGovernment SecuritiesCentre; State & State Sponsored SecuritiesCentre; State & State Sponsored SecuritiesOldest & Most Dominant in terms of Mkt. Cap, Oldest & Most Dominant in terms of Mkt. Cap,

Outstanding Outstanding Securities, trading volume & No. of Securities, trading volume & No. of participantsparticipants

Benchmark for pricing Corporate PaperBenchmark for pricing Corporate PaperAn instrument of Monetary Policy by RBIAn instrument of Monetary Policy by RBIRegulated by RBIRegulated by RBI

Public Sector Unit BondsPublic Sector Unit BondsBanks, FIs & Corporates have been the major Banks, FIs & Corporates have been the major

subscriberssubscribersTax Free Bonds constitute over 50 % of outstanding Tax Free Bonds constitute over 50 % of outstanding

PSU PSU BondsBonds Corporate SecuritiesCorporate Securities

Commercial Papers & BondsCommercial Papers & BondsRegulated by SEBI.Regulated by SEBI.

Banking Short Term Papers (Less Dominant Segment)Banking Short Term Papers (Less Dominant Segment)Certificate of DepositCertificate of Deposit

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DEBT MARKET DEBT MARKET PARTICIPANTSPARTICIPANTS

1.1. Central Govt.Central Govt. – – to raise moneyto raise money2.2. RBIRBI – – Investment Banker to the Govt.; raises Investment Banker to the Govt.; raises

funds; participates in the funds; participates in the market through market through open market operations; regulates Bank open market operations; regulates Bank rates, rates, REPO etc.REPO etc.

3.3. Primary DealersPrimary Dealers – – Market Intermediaries Market Intermediaries appointed by RBI; appointed by RBI; Underwriters & Underwriters & Market Makers for G. Sec.; have access to Market Makers for G. Sec.; have access to CALL CALL markets & REPO markets.markets & REPO markets.

4.4. State Govts.State Govts. – – for funding development for funding development projects & budget deficits.projects & budget deficits.

5.5. PSUsPSUs – – large issuers of Debt Securities; large issuers of Debt Securities; investors in Debt markets.investors in Debt markets.

6.6. CorporatesCorporates – – issuers & investors. issuers & investors.7.7. Public Sector FIsPublic Sector FIs – – issuers & investors.issuers & investors.

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DEBT MARKET DEBT MARKET PARTICIPANTSPARTICIPANTS

8.8. BanksBanks – – largest investors (Treasury Bond & largest investors (Treasury Bond & Bill Markets); for SLR Bill Markets); for SLR requirements; requirements; arrangers for Commercial Papers; issuer & arrangers for Commercial Papers; issuer & investor investor in Short Term Bond Markets.in Short Term Bond Markets.

9.9. MFsMFs – – as investors, who trade on their as investors, who trade on their portfolios. (cannot borrow).portfolios. (cannot borrow).

10.10. FIIsFIIs – – Can invest up to US $ 1.75 Billion Can invest up to US $ 1.75 Billion (applicable to Dated G. Sec. (applicable to Dated G. Sec. & T-Bills); & T-Bills); both under 100% Debt route & the general both under 100% Debt route & the general 70:30 route.70:30 route.

11.11. PFsPFs – – Large investors; not active traders & Large investors; not active traders & limitations on selling limitations on selling (unless shortfall in (unless shortfall in funding).funding).

12.12. Charitable Institutions, Trusts & Charitable Institutions, Trusts & SocietiesSocieties – – Large Investors (but Large Investors (but limitations on buying & trading).limitations on buying & trading).

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G-SEC. / BOND G-SEC. / BOND MARKETMARKET

# Comprises of long-term Govt. borrowingsComprises of long-term Govt. borrowings# Largest segment of the debt marketLargest segment of the debt market# The government raises resources by issuing The government raises resources by issuing

G-Secs, pre-dominantly to fund the fiscal G-Secs, pre-dominantly to fund the fiscal deficit.deficit.

# Qualifies for SLR holdings of banksQualifies for SLR holdings of banks# Auction-based price determinationAuction-based price determination# Screen based negotiations for tradingScreen based negotiations for trading# Development of the yield curve for G-Secs Development of the yield curve for G-Secs

for marking-to-market (M2M) portfolios of for marking-to-market (M2M) portfolios of banksbanks

# The G-Sec market also benefited from The G-Sec market also benefited from emergence of liquidity arrangement through emergence of liquidity arrangement through the Liquidity Adjustment Facility (LAF)the Liquidity Adjustment Facility (LAF)

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G-SEC. / BOND G-SEC. / BOND MARKETMARKET

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YEARYEAR

Total Total Amount Amount

Issued (Rs. Issued (Rs. cr.)cr.)

Weighted Weighted Tenor (Yrs)Tenor (Yrs)

Weighted Cut-Weighted Cut-Off Yield (% Off Yield (%

p.a.)p.a.)

1995-961995-96 38634.2438634.24 5.73765.7376 13.749613.7496

1996-971996-97 27911.0627911.06 5.51125.5112 13.692813.6928

1997-981997-98 43390.3943390.39 6.57576.5757 12.0112.01

1998-991998-99 83752.8283752.82 7.70647.7064 11.862411.8624

1999-001999-00 86629.8586629.85 12.661412.6614 11.766111.7661

2000-012000-01 100183100183 10.610.6 10.9510.95

2001-022001-02 114213114213 14.314.3 9.449.44

2002-032002-03 125000125000 13.813.8 7.347.34

2003-042003-04 121500121500 14.9414.94 5.715.71

2004-052004-05 8035080350 14.1314.13 6.116.11

2005-062005-06 131000131000 16.916.9 7.347.34

2006-072006-07 146000146000 14.7214.72 7.897.89

2007-082007-08 156000156000 14.914.9 8.128.12

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MARKETGovt's Market Borrowings - Average Tenor & Yield

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

Years

Total

Am

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Issu

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s. Cr

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2

4

6

8

10

12

14

16

18

Weig

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Ten

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Yiel

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p.a.

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Total Amount Issued (Rs. cr.) Weighted Tenor (Yrs) Weighted Cut-Off Yield (% p.a.)

SUBSIDIARY GENERAL SUBSIDIARY GENERAL LEDGER {SGL}LEDGER {SGL}

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¥ Central Govt. Secs. & T-Bills are held Central Govt. Secs. & T-Bills are held as dematerialized entries in the SGL of as dematerialized entries in the SGL of RBI.RBI.

¥ To trade these securities, participants To trade these securities, participants should have an account (for securities) should have an account (for securities) with the SGL & also a Current account with the SGL & also a Current account (for money) with RBI.(for money) with RBI.

¥ Settlement is on DvP basis.Settlement is on DvP basis.¥ The PDO, enables the transfer of The PDO, enables the transfer of

securities, thru SGL.securities, thru SGL.¥ CCILCCIL – Settlement Guarantee; Funds – Settlement Guarantee; Funds

& Securities are netted for settlement.& Securities are netted for settlement.

CONSTITUENT CONSTITUENT SUBSIDIARY GENERAL SUBSIDIARY GENERAL

LEDGER {CSGL}LEDGER {CSGL}SGL account is a facility provided by RBI to SGL account is a facility provided by RBI to large banks and FIs to hold their investments large banks and FIs to hold their investments in G-Secs & T-bills in the electronic book in G-Secs & T-bills in the electronic book entry form. Such institutions can settle their entry form. Such institutions can settle their trades for securities held in SGL through a trades for securities held in SGL through a delivery-versus-payment (DvP) mechanism, delivery-versus-payment (DvP) mechanism, which ensures simultaneous movement of which ensures simultaneous movement of funds and securities. As all investors in G-funds and securities. As all investors in G-Secs do not have access to the SGL system, Secs do not have access to the SGL system, RBI has permitted such investors to open a RBI has permitted such investors to open a gilt with any entity authorized by RBI for this gilt with any entity authorized by RBI for this purpose and thus avail of the DvP settlement. purpose and thus avail of the DvP settlement. RBI has permitted NSCCL, NSDL, RBI has permitted NSCCL, NSDL, CDSL,SHCIL, banks and PDs to offer CDSL,SHCIL, banks and PDs to offer constituent SGL account facility to an investor constituent SGL account facility to an investor who is interested in participating in the who is interested in participating in the government securities market.government securities market.

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PRIMARY DEALERS PRIMARY DEALERS {PDs}{PDs}

19 PDs19 PDs Act as UNDERWRITERS (primary mkts.) Act as UNDERWRITERS (primary mkts.)

& MARKET MAKERS (secondary mkts.)& MARKET MAKERS (secondary mkts.) PDs are cos. having Minimum Net PDs are cos. having Minimum Net

Owned funds* of Rs. 1000 crore.Owned funds* of Rs. 1000 crore. PDs are cos. having Net NPAs of 3% & a PDs are cos. having Net NPAs of 3% & a

profit making record for the last 3 yrs.profit making record for the last 3 yrs.

**{Net Owned Funds = (Paid-up Equity {Net Owned Funds = (Paid-up Equity Capital + Free Reserves + Balance in Capital + Free Reserves + Balance in Share premium account + Capital Share premium account + Capital Reserves) – (Accumulated Loss Balance + Reserves) – (Accumulated Loss Balance + Book value of intangible assets)}Book value of intangible assets)}

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BIDDING COMMITMENT BIDDING COMMITMENT of PDsof PDs

# PDs have to make an annual PDs have to make an annual commitment to bid for G. Secs. & T-Bills.commitment to bid for G. Secs. & T-Bills.

# A success ratio of 40% in T-Bill auctions A success ratio of 40% in T-Bill auctions should be on a half-yearly basis.should be on a half-yearly basis.

# A success ratio of 40% in Dated Sec.’s A success ratio of 40% in Dated Sec.’s auctions should be on a yearly basis.auctions should be on a yearly basis.

# Aggregate bids should not be less than a Aggregate bids should not be less than a specified amount. Specified amounts are specified amount. Specified amounts are separately quoted for Dated Secs. & T-Bills.separately quoted for Dated Secs. & T-Bills.

# RBI holds a discussion with PDs in the RBI holds a discussion with PDs in the month of March immediately after the Union month of March immediately after the Union Budget, to finalize the annual business plan Budget, to finalize the annual business plan of each PD. The business plan is inclusive of of each PD. The business plan is inclusive of Bidding Commitment & Underwriting Bidding Commitment & Underwriting obligation.obligation.

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U/w G-Secs of Central U/w G-Secs of Central Govt.Govt.

# The u/w commitment in this case is The u/w commitment in this case is divided into 2 parts (1) MUC & (2) ACU..divided into 2 parts (1) MUC & (2) ACU..

# The MUC is so divided among all the PDs The MUC is so divided among all the PDs that at least 50% of the notified amt is that at least 50% of the notified amt is mandatorily u/w equally by all PDs, put mandatorily u/w equally by all PDs, put together.together.

# The remaining portion of the notified The remaining portion of the notified amount will be u/w through an ACU auction.amount will be u/w through an ACU auction.

# RBI announces the MUC of each PD & the RBI announces the MUC of each PD & the balance amt to be u/w under the ACU auction.balance amt to be u/w under the ACU auction.

# Each PD has to bid for a minimum amt Each PD has to bid for a minimum amt equivalent to its allotted MUC. PDs cannot bid equivalent to its allotted MUC. PDs cannot bid for more than 30% of the notified amt in the for more than 30% of the notified amt in the ACU auction.ACU auction.

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# Bids within the stipulated time, Bids within the stipulated time, should indicate the amt of u/w should indicate the amt of u/w commitment & u/w commission rates. commitment & u/w commission rates. (Depending upon the bids submitted RBI (Depending upon the bids submitted RBI decides on the commission rate & decides on the commission rate & informs the PDs.)informs the PDs.)

# Multiple bids can be submitted.Multiple bids can be submitted.# Successful ACU Auction bidders are Successful ACU Auction bidders are

paid as per Auction Rules.paid as per Auction Rules.# For MUC, those PDs who have won For MUC, those PDs who have won

4% or more of the notified amt in the 4% or more of the notified amt in the ACU auction, will be paid @ the weighted ACU auction, will be paid @ the weighted average of all the winning bids; others average of all the winning bids; others would be paid @ the weighted average of would be paid @ the weighted average of 3 lowest bids in the ACU auction.3 lowest bids in the ACU auction.

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# It is expected that the PDs bid for an It is expected that the PDs bid for an amt not less than their total u/w amt not less than their total u/w commitment.commitment.

# If two or more issues are floated on If two or more issues are floated on the same day, the minimum bid amt will the same day, the minimum bid amt will be applied to each issue separately.be applied to each issue separately.

# U/w commission will be paid on the U/w commission will be paid on the amt accepted for u/w by the RBIamt accepted for u/w by the RBI

# RBI is SUPREME. RBI reserves the RBI is SUPREME. RBI reserves the right to accept any amt of u/w up to right to accept any amt of u/w up to 100% of the notified amt or even reject 100% of the notified amt or even reject all the bids tendered by PDs for u/w, all the bids tendered by PDs for u/w, without assigning any reason.without assigning any reason.

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U/w G-Secs of State U/w G-Secs of State Govts.Govts.

# PDs to collectively u/w 100% of the notified amt.PDs to collectively u/w 100% of the notified amt.# PDs cannot bid for more than 30% of the notified PDs cannot bid for more than 30% of the notified

amt of the issue. If two issues are floated at the same amt of the issue. If two issues are floated at the same time, the limit of 30% is applied to the sum of notified time, the limit of 30% is applied to the sum of notified amounts (i.e. both issues are treated separately).amounts (i.e. both issues are treated separately).

# Bids within the stipulated time, should indicate Bids within the stipulated time, should indicate the amt of u/w commitment & u/w commission rates.the amt of u/w commitment & u/w commission rates.

# Multiple bids can be submitted.Multiple bids can be submitted.# Depending upon the bids submitted RBI decides Depending upon the bids submitted RBI decides

on the commission rate & the u/w amt up to which bids on the commission rate & the u/w amt up to which bids would be accepted & inform the PDs.)would be accepted & inform the PDs.)

# RBI is SUPREME. RBI reserves the right to RBI is SUPREME. RBI reserves the right to accept any amt of u/w up to 100% of the notified amt or accept any amt of u/w up to 100% of the notified amt or even reject all the bids tendered by PDs for u/w, even reject all the bids tendered by PDs for u/w, without assigning any reason.without assigning any reason.

# U/w commission will be paid on the amt accepted U/w commission will be paid on the amt accepted for u/w by the RBI.for u/w by the RBI.

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UNDERWRITING UNDERWRITING PROCEDUREPROCEDURE

1.1. PDs tender their bids in a prescribed form in a PDs tender their bids in a prescribed form in a sealed cover, so as to reach – The Chief General sealed cover, so as to reach – The Chief General Manager, Internal Debt Management Cell, RBI, Manager, Internal Debt Management Cell, RBI, Central Office, Mumbai. *(Bids have to be submitted Central Office, Mumbai. *(Bids have to be submitted during Banking hours on the working day during Banking hours on the working day immediately preceding the auction day.)immediately preceding the auction day.)

2.2. Multiple bids can be tendered.Multiple bids can be tendered.3.3. PD, not wishing to participate has to tender a PD, not wishing to participate has to tender a

bid with ‘nil’ commitment.bid with ‘nil’ commitment.4.4. Depending upon the bids, RBI decides the cut-Depending upon the bids, RBI decides the cut-

off rate of fee and the u/w amount upto which bids off rate of fee and the u/w amount upto which bids have been accepted.have been accepted.

5.5. All bids above the cut-off fee are rejected.All bids above the cut-off fee are rejected.6.6. RBI is supreme, bids for any amount can be RBI is supreme, bids for any amount can be

accepted and any bid could be rejected, without accepted and any bid could be rejected, without assigning any reason.assigning any reason.

7.7. PDs have to invariably bid, at least to the PDs have to invariably bid, at least to the extent of their u/w commitment accepted by the RBI.extent of their u/w commitment accepted by the RBI.

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UNDERWRITING UNDERWRITING PROCEDUREPROCEDURE

8. 8. PDs can set-off the accepted bids PDs can set-off the accepted bids against the total devolvement, if any, on account against the total devolvement, if any, on account of their u/w commitment accepted by the RBI.of their u/w commitment accepted by the RBI.

9. 9. Devolvement of Secs, if any, takes Devolvement of Secs, if any, takes place on pro-rata basis, depending upon the amt. place on pro-rata basis, depending upon the amt. of u/w obligation accepted by each PD after of u/w obligation accepted by each PD after setting-off the successful bids in the auction.setting-off the successful bids in the auction.

10. 10. U/w fee is paid on the entire amount U/w fee is paid on the entire amount accepted for u/w by the RBI, irrespective of the accepted for u/w by the RBI, irrespective of the actual amount of devolvement. The fee is credited actual amount of devolvement. The fee is credited in the current account of PDs at the RBI, on the in the current account of PDs at the RBI, on the auction date itself.auction date itself.

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Same system is followed for u/w of Same system is followed for u/w of State Govt. Bond Auctions.State Govt. Bond Auctions.

OTHER OBLIGATIONS of OTHER OBLIGATIONS of PDsPDs

§ Support to Primary MarketSupport to Primary Market§ U/w commitment; bidding commitment & success U/w commitment; bidding commitment & success

ratios as prescribed by RBIratios as prescribed by RBI§ Adequate infrastructure & skiled Man-PowerAdequate infrastructure & skiled Man-Power

§ Market Making in G-SecsMarket Making in G-Secs§ 2-way prices thru NDS – Om, OTC market & 2-way prices thru NDS – Om, OTC market &

recognized stock exchangesrecognized stock exchanges§ Has to deal in secondary market for G. Secs. & Has to deal in secondary market for G. Secs. &

take principal positions.take principal positions.§ Advice & Educate investorsAdvice & Educate investors§ Efficient Internal Control SystemEfficient Internal Control System

§ Fair conduct of businessFair conduct of business§ Settlement of TradesSettlement of Trades§ Maintenance of accountsMaintenance of accounts

§ To provide RBI, access to all records, books, To provide RBI, access to all records, books, information & documents as may be required.information & documents as may be required.

§ For transactions in G-Secs. Separate books; for For transactions in G-Secs. Separate books; for self & for clients.self & for clients.

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OTHER OBLIGATIONS of OTHER OBLIGATIONS of PDsPDs

§ Annual Turnover in a FY should not be less Annual Turnover in a FY should not be less than 5 times in Govt. Dated Secs. & 10 times in T-than 5 times in Govt. Dated Secs. & 10 times in T-Bills of average month end stocks during the year.Bills of average month end stocks during the year.

§ Of the total, turnover in respect of outright Of the total, turnover in respect of outright transactions should not be less than 3 times in transactions should not be less than 3 times in Govt. Dated Secs. & 6 times in T-Bills of average Govt. Dated Secs. & 6 times in T-Bills of average month end stocks during the year.month end stocks during the year.

§ Should inform RBI about major complaints Should inform RBI about major complaints against them.against them.

§ Should have a pre-approved ceiling, from the Should have a pre-approved ceiling, from the BoDs, regarding borrowings from money market.BoDs, regarding borrowings from money market.

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(Turnover ratio is computed as the ratio of total purchase & sales during the yr in the secondary market to avg month-end stocks).

FACILITIES to PDsFACILITIES to PDs

LAFLAF Liquidity support from RBILiquidity support from RBI Current & SGL AccountsCurrent & SGL Accounts Access to Call Money MarketAccess to Call Money Market Member of Electronic dealing, Member of Electronic dealing,

trading & settlement systemstrading & settlement systems Favored access to OMO by RBIFavored access to OMO by RBI Funds thru CPsFunds thru CPs

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SECONDARY MARKET for SECONDARY MARKET for G-SecsG-Secs

Listed as soon as they are issued.Listed as soon as they are issued. Predominantly, wholesale markets; with Predominantly, wholesale markets; with

negotiated trades.negotiated trades. SGL holders need to report the trade within 24 SGL holders need to report the trade within 24

hrs. (Time sequence of trade is not observed.)hrs. (Time sequence of trade is not observed.) Hence Negotiated trades, therefore last traded Hence Negotiated trades, therefore last traded

price is not observed.price is not observed. G. Sec. transaction are to be settled on the G. Sec. transaction are to be settled on the

same date or the next working day.same date or the next working day. Transactions done thru a broker of recognized Transactions done thru a broker of recognized

stock exchange should be settled on a ‘T + 2’ stock exchange should be settled on a ‘T + 2’ basis.basis.

In NDS, all trades between members of NDS In NDS, all trades between members of NDS have to be reported immediately.have to be reported immediately.

In such cases, the settlement is routed thru the In such cases, the settlement is routed thru the CCIL.CCIL.

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TRADE SETTLEMENT in TRADE SETTLEMENT in G-SecsG-Secs

* All trades reported to RBI-SGL for All trades reported to RBI-SGL for settlement.settlement.

* Trades settled on GROSS basis, thru DvP.Trades settled on GROSS basis, thru DvP.* Sec.s are held as dematerialized entries Sec.s are held as dematerialized entries

in SGL.in SGL.* PDO oversees the settlement of PDO oversees the settlement of

transactions.transactions.* Gross settlement leads to occasional Grid Gross settlement leads to occasional Grid

Lock.Lock.* Special Fund Facility – undrawn Special Fund Facility – undrawn

collateralized lending & liquidity support collateralized lending & liquidity support facility from RBI.facility from RBI.

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DEBT MARKET in DEBT MARKET in INDIAINDIA

The Indian debt market is today one of the largest in AsiaThe Indian debt market is today one of the largest in Asia It includes securities issued by the Government (Central It includes securities issued by the Government (Central

& State Governments), PSUs, other government bodies, & State Governments), PSUs, other government bodies, financial institutions, banks and corporatesfinancial institutions, banks and corporates

The Indian debt markets with an outstanding issue size The Indian debt markets with an outstanding issue size of Government securities (Central and state) close to of Government securities (Central and state) close to Rs.13,474 billion and a secondary market turnover of Rs.13,474 billion and a secondary market turnover of around Rs 56,033 billion (in the year 2007) is the largest around Rs 56,033 billion (in the year 2007) is the largest segment of the Indian financial markets. (Source RBI & segment of the Indian financial markets. (Source RBI & CCIL).CCIL).

The Government Securities (G-Secs) market is the The Government Securities (G-Secs) market is the oldestoldest and the and the largestlargest component of the Indian debt market in component of the Indian debt market in terms of terms of market capitalizationmarket capitalization, , outstanding outstanding securitiessecurities and and trading volumestrading volumes. The G-Secs market . The G-Secs market plays a vital role in the Indian economy as it provides the plays a vital role in the Indian economy as it provides the benchmark for determining the level of interest rates in benchmark for determining the level of interest rates in the country through the yields on the government the country through the yields on the government securities which are referred to as the risk-free rate of securities which are referred to as the risk-free rate of return in any economy.return in any economy.

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DEBT MARKET in DEBT MARKET in INDIAINDIA

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