Niti Aayog recently highlighted that Government debt market is well developed in comparison to the Corporate Debt Market.
- Debt Market is part of the securities market where debt securities (also known as ‘fixed income securities’) are issued and traded.
- Major Issuers in this market include Central and State Governments, private companies, etc.
Status of Corporate Debt Markets
- It constitutes more than 20 % of the Indian fixed-income universe (as per IMF (2023)).
- It is the second largest segment, following government securities (68 %) (as per IMF (2023)).
- Government securities are a key instrument of the Government debt market.
- Key Instruments: Bonds and Commercial Paper
- Commercial paper is an unsecured, short-term debt instrument issued by corporations to meet their immediate financial requirements.
- Primary Regulator: SEBI
- Opportunities: Provides borrowers an alternative to bank finance and can lower the cost of long-term funding.
Key reason behind the less development of Corporate Debt Markets
- Limited Investor Base, largely dominated by domestic institutions such as insurance companies, mutual funds etc.
- Dominance of private placement (securities are issued to a select group of people)
- Other: Corporate’s preference for Bank Lending, more risk of default in comparison to government securities etc.
Initiative taken to Promote Corporate Debt Markets
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