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TERM LOANS DEBENTURES/BONDS AND SECURITISATION

INTRODUCTION

Apart from owners share capital, corporate enterprises raise long-term funds from creditors in the form of term loans, debentures, bonds and so on. The bulk of term loans raised by the corporate was provided by the financial institutions such as IDBI, ICICI and IFCI. Their support has declined substantially in recent years. Banks have entered term-lending business in the last few years, particularly in the infrastructure/core sector. Bonds/debentures have emerged as substantial source of debt finance to corporate in India in the context of (i) lesser term loan support by financial Institutions, (ii) freedom to corporate to design debt instruments, (iii) withdrawal of interest ceilings on debt instruments. (iv) credit rolling of debt instruments, (v) setting up of the wholesale debt market (WDM) segment by the NSE and (vi) depressed conditions in the equity market in the last few years. Securitisation of loan portfolios is also poised to emerge as a popular instrument in the corporate debt market in India. Sections 1-3 of this Chapter focus on term loans, debentures/ bonds and securitisation. The main points are summarized in the last Section.

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