Presented By
 Mr. Ravindra  Mr. Ajinkya  Mr. Furquan  Mr. Sangram

and non-convertible debentures. . for instance. in India. the corporate bonds (like mortgage bonds) became popular in the 1980s. This is due to the sophisticated bond instruments that have return-reaping assets as their underlying. Moreover. This. corporate debentures.  The bond markets exhibit a much lower volatility than equities. In the US. The performance of the market for debt is directly related to the interest rate movement as it is reflected in the yields of government bonds.Debt Instruments  In most of the countries. the debt market is more popular than the equity market. and all bonds are priced based on the same macroeconomic information. prevented the emergence of a deep and vibrant government securities market. MIBORrelated commercial papers. The bond market liquidity is normally much higher than the stock market liquidity in most of the countries. equity markets are more popular than the debt markets due to the dominance of the government securities in the debt markets. coupled with the automatic monetization of fiscal deficit. such as banks. However. the government is borrowing at a pre-announced coupon rate targeting a captive group of investors.

Advantages of Debt Instruments  Reduction in the borrowing cost of the Government and enable mobilization of resources at a reasonable cost.  Enhanced mobilization of resources by unlocking illiquid retail investments like gold.  Development of heterogeneity of market participants  Assist in development of a reliable yield curve and the term structure of interest rates.  Provide greater funding avenues to public-sector and private sector projects and reduce the pressure on institutional financing. .

. two main types of risks are involved. i. A good case would be an upswing in the prevailing interest rate scenario leading to a situation where the investors' money is locked at lower rates whereas if he had waited and invested in the changed interest rate scenario. The following are the risks associated with debt securities:  Default Risk: This can be defined as the risk that an issuer of a bond may be unable to make timely payment of interest or principal on a debt security or to otherwise comply with the provisions of a bond indenture and is also referred to as credit risk. Specifically.  Reinvestment Rate Risk: can be defined as the probability of a fall in the interest rate resulting in a lack of options to invest the interest received at regular intervals at higher rates at comparable rates in the market.Risks associated with debt securities  The debt market instrument is not entirely risk free. he would have earned more. default risk and the interest rate risk.e..  Interest Rate Risk: can be defined as the risk emerging from an adverse change in the interest rate prevalent in the market so as to affect the yield on the existing instruments.

These bonds are issued to meet financial requirements at a fixed cost and hence remove uncertainty in financial costs.The following are the risks associated with trading in debt securities:  Counter Party Risk: is the normal risk associated with any transaction and refers to the failure or inability of the opposite party to the contract to deliver either the promised security or the sale-value at the time of settlement. It means that. Bond Market:  It consists of Financial Institutions bonds. It is also the most dominant category in the India debt market.  Price Risk: refers to the possibility of not being able to receive the expected price on any order due to a adverse movement in the prices. CLASSIFIACTION OF INDIAN DEBT MARKET Government Securities Market (G-Sec Market):  It consists of central and state government securities. . Corporate bonds and debentures and Public Sector Units bonds. loans are being taken by the central and state government.

DEBT INSTRUMENTS Government Securities Corporate Bonds Certificate of Deposit Commercial Papers .

and the rating of the corporation . there are Treasury Bills or T-Bills.Government Securities It is the Reserve Bank of India that issues Government Securities or GSecs on behalf of the Government of India. 182 days and 364 days. the current market conditions. corporate bonds carry higher risks. These securities have a maturity period of 1 to 30 years. the industry where the corporation is currently operating. Corporate Bonds These bonds come from PSUs and private corporations and are offered for an extensive range of tenures up to 15 years. which are issued by the RBI for 91 days. Comparing to G-Secs. For shorter term. where interests are payable semi-annually. G-Secs offer fixed interest rate. which depend upon the corporation.

Certificate of Deposit Certificate of Deposits (CDs). which usually offer higher returns than Bank term deposits. are issued in demat form Banks can offer CDs which have maturity between 7 days and 1 year. CDs from financial institutions have maturity between 1 and 3 years Commercial Papers There are short term securities with maturity of 7 to 365 days. .

rather than seeking to develop a working relationship with other lenders. the lender receives an equitable return for the structured debt arrangement . The main goal of structured debt is to create a debt situation that provides the debtor with as many benefits as possible. While the overall structure of the debt is adapted to the needs of the borrower. the terms also benefit the lender in the long term. while also keeping the overall debt load as low as possible At the same time.Structured Debt structured debt is some type of debt instrument that the lender has created and adapted to fit the needs and circumstances of the borrower A debt package of this type usually includes one or more incentives that encourage the debtor to do business with the lender.

It is known as a term deposit or time deposit in Canada. It may or may not require the creation of a separate account. until the given maturity date . and the US. New Zealand. Term deposits in India is used to denote a larger class of investments with varying levels of liquidity. They are considered to be very safe investments. Australia.A fixed deposit (FD) is a financial instrument provided by Indian banks which provides investors with a higher rate of interest than a regular savings account. and as a bond in the United Kingdom. The defining criteria for a fixed deposit is that the money cannot be withdrawn for the FD as compared to a recurring deposit or a demand deposit before maturity .

90. . 15 or 45. These investments are safer than Post Office Schemes as they are covered under the Deposit Insurance & Credit Guarantee Scheme of India. The tenure of an FD can vary from 10. The interest rate varies between 4 and 11 percent.Some banks may offer additional services to FD holders such as loans against FD certificates at competitive interest rates. It's important to note that banks may offer lesser interest rates under uncertain economic conditions.60. They also offer income tax and wealth tax benefits.180.5 years and can be as high as 10 years. days to 1.

This is applicable to both interest payable or reinvested per customer or per branch.Fixed Deposit. 10. . customers can submit a Form 15 G (below 65 years of age) or Form 15 H (above 65 years of age). also called Term Deposit is an investment where the interest rate is guaranteed not to change for the nominated term. so you know exactly what your investment is worth Taxability Tax is deducted by the banks on FDs if interest paid to a customer at any branch exceeds Rs.000 in a financial year. This is called Tax deducted at Source and is presently fixed at 10% of the interest. Banks issue Form 16 A every quarter to the customer. as a receipt for Tax Deducted at Source If the total income for a year does not fall within the overall taxable limits.

Customers can avail loans against FDs up to 80 to 90 per cent of the value of deposits. .Non resident Indians and a Person of Indian Origin can also open these accounts.Benefits of FD 1. The rate of interest on the loan could be 1 to 2 per cent over the rate offered on the deposit 2.

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