What is the Debt Market?
The Debt market is the market where fixed income securities of different types and facilities are issued and traded. Therefore, credit markets are markets for fixed income securities issued by central and state governments, municipal corporations, government bodies, and commercial institutions like financial institutions, banks, public sector units, public limited companies, and structured finance instruments.
The debt market in India consists mainly of two categories - government securities or G-sek market which includes central government and state government securities and corporate bond market.
To finance its fiscal deficit, the Government seeks fixed income instruments and borrows money by issuing G-seks containing sovereign securities issued by the Reserve Bank of India (RBI) on behalf of the Government of India. The corporate bond market (also known as the non-GSEC market) consists of Financial Institutions (FI) bonds, Public Sector Units (PSU) bonds, and corporate bonds/debentures.
Issuance of bonds increases the debt burden of the bond issuer as the contract interest payment should be paid to the bondholders. In the debt market, the bondholders do not acquire ownership in the business or make no claim for the future profits of the borrower. The sole obligation of the borrower is to repay the loan with interest.
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