Corporate Debt Market Flashcards
Q. What are some key facts about the Corporate Debt Market ?
Ans * debt market, also called bond market, fixed-income market, or credit market- is the collective name given to all trades and issues of debt securities. Can be broadly divided into the govt debt market and the corporate debt market .
* Issue : Companies issue corporate bonds to finance current operations, expand product lines or open new manufacturing facilities.
* Nature : usually describe longer-term debt instruments that provide a maturity of at least one year .
* Regulations : SEBI has jurisdiction over the Corporate Debt Market.
* Status of the market in India : Outstanding corporate bonds in India, as a % Of GDP, stood around 17% in March 2022.
- S. Korea (>80%), Malaysia (>50%) and China (close to 40%).
Q. What is the significance of the corporate debt market?
Ans : 1. Investment needs : from a consumption driven to an investment led economy.
2. Efficient allocation of resources .
3. Health of corporate balance sheet.
4. Financial inclusion of SMEs.
5. Financial stability : address asset liability mismatch of banks .
Q. What are some issues with the corporate debt market in India ?
Ans : 1. Systemic flaws in the credit rating process.
2. Mode of issuance : most corporate bonds are issued for select market participants and are not open to the public. Thus , hindering the penetration of the corporate debt market.
3. Liquidity constraints.
4. Dominance of govt securities.
Q. What are some “way forwards” for the corporate debt market in India?
Ans : 1. Transform Credit Rating agencies and credit rating processes to ensure greater transparency.
2. Improve the availability of market information .
3. Broaden investor base.
