Indian Debt Markets, also known as Bond markets are an important source of funding for various institutions such as corporates, individuals and even the government. Funds raised in such a manner do not dilute the share capital of a company and also secure priority at the time of repayment. Many corporates prefer this route of raising funds, to safeguard and limit their shareholding amongst a few key stakeholders.
The Indian Debt Market is majorly categorized into two types of market, based on the issuer of securities:
- G-Sec Market (Where the issuer is the Government)
- Corporate Bond Market (Where the issuers are other than government)
The Indian government is a major participant in the debt markets, raising a substantial amount of debt every month through its T-bill auctions which take place every Wednesday.
There are numerous types of debt instruments that are used to raise funds. Let us understand some of these of debt instruments in brief:
- Certificate of Deposit (CD):
These are short-term borrowings in the form of Promissory Notes, for a period not exceeding one year. They resemble bank fixed deposits. But unlike traditional time deposits these are freely negotiable instruments.
- Commercial Paper (CP):
These are short term borrowings made by corporates, financial institutions and other participants of the money market
- Treasury Bills (T-Bills):
These are a class of government securities issued by the Central Government of India. These bills have fixed maturities, not exceeding 364 days. Such securities are usually issued by way of an auction which takes place on specific Wednesdays in a month.
Debentures are instruments issued by corporates to raise funds usually for a period exceeding one year. These can be of various types, such as convertible/non-convertible, redeemable/irredeemable, secured/unsecured, etc.
Bonds are similar to debentures, with only difference that Bonds are issued by the Government, whereas debentures are issued by other entities.
At RichVik, we provide avenues to invest into bonds and other debt instruments with constant monitoring & advisory from our end.