InvestorQ : What are the major instruments that the debt market platform in India offers?
Deepa Salunkhe made post

What are the major instruments that the debt market platform in India offers?

diksha shah answered.
1 year ago

The following are some of the broad classes of instruments that investors can access in the debt markets. Of course, there may be many sub-classifications but we will not get into micro classifications at this point of time.

MIBOR linked bonds: MIBOR (Mumbai Inter Bank Offered Rate) bonds are closely modelled on the LIBOR (London Inter Bank Offered Rate) bonds. Currently, Reuters and the National Stock Exchange (NSE), are the two calculating agents for the benchmark. The NSE MIBOR benchmark is the more popular of the two and is based on rates polled by NSE from a representative panel of 31 banks/institutions/primary dealers.

Commercial Papers (CPs): These are short term unsecured promissory notes, generally issued by corporate entities.

Certificate of Deposits (CDs): These are fixed income instruments for a short term period and issued by banks.

Treasury Bills: These are issued by Reserve Bank of India (RBI) and are used to raise funds for the short period of less than one year.

Medium- to long-term bonds: These are issued by corporate entities/financial institutions. They can feature fixed rate bonds or floating rate bonds.

Call money market: This represents overnight and term money between banks and institutions.

Repo transactions: These represent temporary sale with an agreement to buy back the securities at a future date at a specified price.

Collateralized Borrowing and Lending Obligation (CBLO): CBLOs were developed by the Clearing Corporation of India (CCIL) and Reserve Bank of India (RBI). It is a money market instrument that represents an obligation between a borrower and a lender as to the terms and conditions of the loan. The details of the CBLO include an obligation for the borrower to repay the debt at a specified future date and an expectation of the lender to receive the money on that future date, and they have a charge on the security that is held by the CCIL. CBLOs are used by those who are heavily restricted or have been kept out of the interbank call money market.

Apart from the list above, some of the other instruments that are available in the debt market include Debentures, Secured premium notes, Deep Discount Bonds, PSU Bonds / Tax-Free Bonds, Floating Rate Bonds, State Government Securities, STRIPS and Interest Rate Derivative products.