Debt market uploaded by:- komal walia, india komal.walia@yahoo.in

1. Presented By:-
Gurjeet Kaur Presented To:-
M.Com 3sem Mr. Swinder Singh

2. Meaning of debt securities
The debt market is
any market where
trading of debt
instruments/ securities
take place.

6. Government
Securities
Market
CLASSIFIACTION
OF
INDIAN DEBT
MARKET
Bond
Market

7. 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.
More than 80% - Debt
securities

8. Features
Issued
of at
Government Liquidity
Securities Face
Value
Features
Debt Fixed
rate of
Safety
Instru investment Government
Of Securities
-ment Interest
Issued Exemption IIs are the
By main
Maturity on
participa
RBI Tax nt

9. Players in Government Securities
1. Central & State Government
2. Commercial Banks, RBI, SBI, Cooperative
Banks.
3. Specialized Financial Institutions Like:- IDBI,
IFCI, SFC etc.
4. Joint Stock companies.
5. Non Banking Financial Companies.
6. Investing institutions like:- LIC, GIC & UTI.
7. Provident Funds
8. Individuals (w.e.f. Dec., 2001)

10. Bond Market:
It consists of Financial Institutions bonds, Corporate bonds
and debentures and Public Sector Units bonds. These bonds
are issued to meet financial requirements at a fixed cost.

11. Features of Bond Instruments
1. Higher Risky
2. High Rate of Return
3. Taxable
• Bonds issued by corporations
or government are usually
taxable
• Bonds issued by state
governments or
municipalities are usually
exempt from tax
4. Maturity
5. INTEREST RATES

12. Structure of Indian Debt Market
SEBI, RBI

13. Central
State Government
Governme RBI
nt
Corporat
e Primary
treasurie Dealers
s
Financial PARTICIPANTS
IN THE Public
Institutio
Sector
ns DEBT MARKET
Charitabl
e
Banks Institutio
ns
Mutual Provident
Foreign Funds
Funds
Institutio
nal
Investors

14. PRIMARY ISSUANCE PROCESS
Issue Through Auction
Issue of securities with Pre announced Coupon Rate
Issue of securities through tap sale
Issue in conversion of T.bills
Issuance process of T.bills
State government securities

15. Market Segment
Primary market Secondary market

16. PRIMARY MARKET
• 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

17. Secondary Market Segments
Secondary market
NSE BSE
NSE deal with debt market BSE deal with debt market
Wholesale debt market
Retail debt market

18. Clearing and Settlement
Clearing
Clearing is all steps of the post-trade processes
apart from the final settlement — i.e. apart from
the final payment and change in ownership.
Settlement
Settlement is the last step in the post-trade
process. Settlement is a two way process which
involves transfer of funds and securities on the
settlement date.

19. Salient features of Clearing and Settlement in Debt
Market segment
1. Clearing and settlement of all trades in the Debt Market shall
be subject to the Bye Laws, Rules and Regulations of the
Capital Market Segment and such regulations, circulars and
requirements etc. as may be brought into force from time to
time in respect of clearing and settlement of trading in Debt
Market (Government securities).
2. Settlement in Debt Market is on T + 2 Rolling basis viz. on the
2nd working day. For arriving at the settlement day all
intervening holidays, which include bank holidays, NSE
holidays, Saturdays and Sundays are excluded. Typically
trades taking place on Monday are settled on Wednesday,
Tuesday's trades settled on Thursday and so on.
3. NSCCL shall compute member obligations and make available
reports/data by T+1.
4. The existing clearing bank accounts shall be used for funds
settlement.

20. STRIPS
• Separate Trading of Registered Interest and
Principal Securities (STRIPS)
• It is that whose interest and principal
portions of the security have been separated,
or "stripped"; these may then be sold
separately in the secondary market.

21. Example
• a Treasury note with 10 years remaining to
maturity consists of a single principal
payment, due at maturity, and 20 interest
payments, one every six months over a10 year
duration. When this note is converted to
STRIPS form, each of the 20 interest payments
and the principal payment becomes a
separate security.

23. • Generally the following convention is followed for
calculating price/yield of STRIPS:
• 100
• P = ---------------------
• (1+y/2)^((r/s)+n)
•
• Where
• P = Price of strip
• y = Gross redemption yield
• r = Number of days from the settlement date to the
next quasi coupon date*
• s = Exact number of days in the current quasi
coupon period
• n = Number of remaining quasi coupon periods
after the current period

24. Features of STRIPS
• STRIPS let investors hold and trade the individual
interest and principal components of eligible
Treasury notes and bonds as separate securities.
• STRIPS are popular with investors who want to
receive a known payment on a specific future date.
• It is issued at discount.
• These are zero coupon instrument with single
maturity value.

25. CONCLUSION
• The debt markets play an important role in
efficient mobilization and allocation of resources
in the economy , financing the development
activities of the Government ,transmitting signals
for implementation of the monetary policy,
facilitating liquidity management in tune with
overall short term and long term objectives.