financial institution & debt market
DESCRIPTION
its description on the basis of debt marketTRANSCRIPT
PRESENTED BY:
Sudhir jha Ashish Gupta
Rahul MahajanAbhishek Srivastava
Vibhaw Sinha
Gour Sunder Paul
Features of Government Securities
•Issued at face value
•No default risk as the securities carry sovereign guarantee.
•Ample liquidity as the investor can sell the security in the secondary market
•Interest payment on a half yearly basis on face value
•No tax deducted at source
•Can be held in Demat form.
•Rate of interest and tenor of the security is fixed at the time of issuance and is not subject to change (unless intrinsic to the security like FRBs - Floating Rate Bonds).
•Redeemed at face value on maturity
•Maturity ranges from of 2-30 years.
•Securities qualify as SLR (Statutory Liquidity Ratio) investments (unless otherwise stated).
1. Higher Risky2. High Rate of Return3. Taxable Bonds issued by
corporations or government are usually taxable Bonds issued by state governments or municipalities are usually exempt from tax.
4. Maturity5. INTEREST RATES
Features of Bond Instruments
FEATURES OF CERTIFICATE OF BONDS
1. Certificate of deposits is considered as risk-less because default risk in them is almost negligible and hence its safe bet for investors.
2. Certificate of deposits is highly liquid and marketable and hence investors can buy or sell it whenever they desire to do so.
3. They are transferable from one party to another which cannot be done with term deposits and hence it is an added advantage for investors who are willing to invest in it.
FEATURES OF COMMERCIAL PAPERS
1. It is a negotiable instrument.
2. It is an unsecured instrument as it is not backed by any assets of the company.
3. It can be sold by the issuing company, directly to the investors
PARTICIPANTS & PRODUCTS IN DEBT MARKET
Issuer Instrument Maturity
Investors
Central Government
Dated Securities 2-20 Years RBI,Banks,Insurance Co., PFs, MFs, PDs,
Central Government
T-Bills 91/364 days RBI,Banks,Insurance Co., PFs, MFs, PDs,Individuals
State Government
Dated Securities 5-10 Years Banks,Insurance Co.,PFs.
PSUs Bonds 5-10 Years Banks,Insurance Co., PFs, MFs, PDs,Individuals, Corporates
Corporates Debentures 1-12 Years Banks, Mutual Funds, Corporates,Individuals
Corporates,PDs
Commercial paper
3 months to 1 Year
Banks, Mutual Funds, FI s, Corporates,Individuals
Banks Certificates of Deposit
3 months to 1 Year
Banks, Corporates
PRIMARY ISSUANCE PROCESS
ISSUE THROUGH AUCTION
ISSUE OF SECURITIES WITH PRE ANNOUNCED COUPON RATE
ISSUE OF SECURITIES THROGH TAP SALE
ISSUE IN CONVERSION OF T BILLS
ISSUANCE PROCESS OF T BILLS
STATE GOVERNMENT SECURITIES
• It is that market in which shares, debentures and other securities are sold for the first time for collecting long term capital.
• This market is concerned with new issues. Therefore the primary market is also called “new issue market”.
• In this market, the flow of funds is from savers to borrowers. Hence, it helps directing in the capital formation of the country
PRIMARY MARKET