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)