analysis of debt market in india
DESCRIPTION
Analysis of Debt market in indiaTRANSCRIPT
Analyze the India’s Debt Market and
Suggestions to make it a robust one
for support to economic growth.
CA. Bineet SundriyalMBF-5 (New Delhi)
Introduction to Indian Debt Market
Introduction to Indian Debt Market
• The Debt Market is the market where fixed income securities of various types and features are issued and traded.
• As of end 2012, the outstanding amount of bonds in India stood at Rs 55.8 trillion ($1 trillion approx.)
• Indian Bond Market is dominated by Government
Securities. At the end of 2012 approx. 79% of Outstanding Bonds were Government Bonds.
Comparison of Resource Mobilization
33.30% increase in Volume in comparison of 2010-11
In 2011-12 about 72.60% resources raised by G-Sec
Position of Indian Bond Market in Asia
India’s bond market is roughly equivalent to :
27 % of China’s bond market
69% of Korea’s bond Market
94% of combined bond market of ASEAN-6
Govt. & Corp. Bond Outstanding as % of GDP for Asian Economies
Outstanding FII Investment Limits in Indian Fixed Income Market
Corporate Debt Market
Features of Corporate Bond Market
• Corporate debt market is less than 5% of India’s debt market and around 12% of GDP.
• India’s bond market is underdeveloped even in comparison with many emerging markets.
• Indian corporate bond market is dominated by AA or higher rated bonds.
• Lack of liquidity in secondary market.
Debt Market Segments-NSE
Security-wise Distribution of WDM Turnover
Participants-wise Distribution of WDM Turnover
Corporate Bonds Private Placement vs Public Placement
(in terms of volume)
₹ in Cr.
Corporate Bonds Private Placement vs Public Placement
(in terms of numbers)
The Problem – Demand Side
Regulatory restriction on institutional investors• Restrictions on Banks for investing in Bonds.• Insurance companies are permitted to hold a maximum of 25% of
their portfolio in bonds rated less than AA.• Pension fund managers are regulated to invest under 10% of the
funds collected in corporate bonds that are investment grade• In addition, regulations require that once subscribed to they have
to be held to maturity.
Low retail participation
The Problem – Supply Side
Private Placement
Absence of sub-investment grade securities
Lack of supply of innovative debt instruments
Long and expensive issuance process
The Way Forward
The Way Forward
The issue of Regulatory Overlapping should be addressed.
Need of Simple Products.
Increase Liquidity in Secondary Market
Tax Incentives
Procedural ease for Companies listed on any exchange in India.
Rationalization of Stamp Duty.
Appointment of Market Makers in Corp Bond Market.
Trading Platforms.
The Way Forward(Cont.)
Thank You
Why Private Placement ?
Minimum Disclosures
Low cost
Tailor made Structures
Speedy Fund Raising
Structure of Indian Debt Market
Trend of Primary Issuance of Corporate Bonds (Rs Bn)