Debt market refers to the financial market where investors buy and sell debt securities, mostly in the form of bonds. These markets are important source of funds, especially in a developing economy like India. India debt market is one of the largest in Asia. Like all other countries, debt market in India is also considered a useful substitute to banking channels for finance. The most distinguishing feature of the debt instruments of Indian debt market is that the return is fixed. This means, returns are almost risk-free. This fixed return on the bond is often termed as the ‘coupon rate’ or the ‘interest rate’. Therefore, the buyer (of bond) is giving the seller a loan at a fixed interest rate, which equals to the coupon rate. Advantage of investing in India debt market is its high liquidity. Banks offer easy loans to the investors against government securities. As there are several advantages of investing in India debt market, there are certain disadvantages as well. As the returns here are risk free, those are not as high as the equities market at the same time. So, at one hand you are getting assured returns, but on the other hand, you are getting less return at the same time.

Saket Kumar

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