A Study of Indian Financial Stability and Debt Market

FINANCE

This study presents an empirical evidence of the primary debt market in India. Bond markets rarely fulfill the alternate role to bank financing in India. The benefits of bond markets include diversifying credit risks across the economy by providing an alternative to conventional bank lending. Bond markets supply longterm funds for the growth of the infrastructure or other sectors to fulfill long-term investment needs. It can also lower funding costs of the firm by liquidity premium on secondary market. They provide diversity in financial products with flexibility to meet the specific needs of investors and borrowers. Timing of an issue and the conditions of the economy including the triggers in other markets could impact the activity in the whole sale debt market. Issues that satisfy the needs of investor segments could improve participation. We attempt to test few hypotheses; whether bond issuance and factors in other markets could be positively correlated, whether the presence of good issuers (good papers) improve participation, etc using data from the whole sale debt market, whether the limits on government borrowings could improve the trades in the wholesale debt market, etc.

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