analysis of debt market in india
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Analysis of Debt market in indiaTRANSCRIPT
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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)
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Introduction to Indian Debt Market
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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.
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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
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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
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Govt. & Corp. Bond Outstanding as % of GDP for Asian Economies
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Outstanding FII Investment Limits in Indian Fixed Income Market
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Corporate Debt Market
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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.
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Debt Market Segments-NSE
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Security-wise Distribution of WDM Turnover
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Participants-wise Distribution of WDM Turnover
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Corporate Bonds Private Placement vs Public Placement
(in terms of volume)
₹ in Cr.
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Corporate Bonds Private Placement vs Public Placement
(in terms of numbers)
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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
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The Problem – Supply Side
Private Placement
Absence of sub-investment grade securities
Lack of supply of innovative debt instruments
Long and expensive issuance process
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The Way Forward
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The Way Forward
The issue of Regulatory Overlapping should be addressed.
Need of Simple Products.
Increase Liquidity in Secondary Market
Tax Incentives
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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.)
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Thank You
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Why Private Placement ?
Minimum Disclosures
Low cost
Tailor made Structures
Speedy Fund Raising
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Structure of Indian Debt Market
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Trend of Primary Issuance of Corporate Bonds (Rs Bn)