debt_market

May 19th, 2015
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REASONS FOR LOWER VISIBILITY OF INDIAN DEBT MARKET After reviewing functioning of debt market in some other markets and in India, the following issues have been identified as some of the major aspects affecting the market.

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REASONS FOR LOWER VISIBILITY OF INDIAN DEBT MARKETAfter reviewing functioning of debt market in some other markets and in India,the following issues have been identified as some of the major aspects affectingthe market.a) Poor Quality PaperQuality of paper refers to regular payment of coupon and repayment of principalat the right time. Companies that do not default on these two counts are said tobe issuing high quality paper. High quality paper issued in the market does notcreate problems / issues for investors, regulators and issuers. The question ofprivate placement vs. public issue and institutional investors vs. retail investorare of less significance and almost no consequence in the market, if the quality ofthe paper is good.It is the poor quality paper with a possibility of non-payment of coupon andprincipal that poses threat to the development of the market and hence stringentregulatory norms are warranted.Imposition of additional regulatory provisions, though has its opportunity cost,therefore, it is essential to strike a balance between regulatory protection anddisclosure based regulation.Further, in an emerging market / developing market the incidence of industrialsickness is relatively high. This high industrial sickness generally translates intodefault of companies and their obligations. The bond paper issued by companiesturns worthless and creates problems in the minds of investors. Since mostretail investors, who invest in bonds, hold f

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