Explain the significance and functions of Indian Debt markets and describe the main participants in these markets.

The significance and functions of Indian Debt markets

The Indian debt market is predominantly a wholesale market with a majority of institutional investors, mainly banks, financial institutions, mutual funds, provident funds, insurance companies and corporates. The small number of large players has resufted in the debt markets being fairty concentrated, evolving into wholesale negotiated dealings markets

Debt market refers to the financial market where investors buy and sell debt securities, mostly in the form of bonds. These markets are important source of funds, especially in a developing economy like India. India debt market is one of the largest in Asia. Like all other countries, debt market in India is also considered a useful substitute to banking channels for finance.

The most distinguishing feature of the debt instruments of Indìan debt market is that the return is fixed. This means, returns are almost risk-free. This fixed return on the bond is often termed as the coupon rate or the interest rate. Therefore, the buyer (of bond) is giving the seller a loan at a fixed interest rate, which equals to the coupon rate.

Indian Debt Market

Indian debt market can be classified into two categories:

. Government Securities Market (G-Sec Market): It consists of central and state government securities. It means that, loans are beIng taken by the central and state government. It is also the most dominant category in the India debt market.

. Bond Market: ft consists of Financial Institutions bonds, Corporate bonds and debentures and __________ __________ ___ _____ __________ ____ ________ _____ __________.
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