With the equity markets reeling under the bear phase, activity in debt markets increased tremendously. Yet, debt markets are facing challenges as the issues have to be very quickly resolved to bring them at par with the global markets.

The secular downward movement in interest rates has resulted in ample profits to banks, primary dealers and debt mutual funds. Banks reeling under large NPAs and sluggish credit pick up have been deploying most of the resources in the debt market, especially the government securities market. This has resulted in secondary market volumes reaching a peak of around Rs. 6,500 crores a day, up from Rs. 250 crores seen 4-5 years back.

Apart from the quantitative aspect, the markets have also been under going a qualitative change. The dematerialization of corporate debt, the maturing of credit rating process, introduction of primary dealers, move towards market driven interest rates and dynamic liquidity management by RBI through open market operations (OMOs) have significantly altered the nature of the markets.

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