In India, which of the following can trade in Corporate Bonds and Gove

In India, which of the following can trade in Corporate Bonds and Government Securities ?

  1. Insurance Companies
  2. Pension Funds
  3. Retail Investors

Select the correct answer using the code given below :

1 and 2 only
2 and 3 only
1 and 3 only
1, 2 and 3
This question was previously asked in
UPSC IAS – 2024
The correct option is D.
All three categories of investors can trade in Corporate Bonds and Government Securities in India.
1. Insurance Companies: Insurance companies are major investors in the debt market, including G-Secs and corporate bonds, primarily due to regulatory requirements to invest a certain percentage of their funds in approved securities and to match their long-term liabilities with long-term assets.
2. Pension Funds: Pension funds, such as EPFO and funds under the National Pension System (NPS), are also significant players in the debt market. They invest substantial amounts in G-Secs and corporate bonds as part of their long-term investment strategy to meet future pension obligations.
3. Retail Investors: Retail investors can invest in both government securities and corporate bonds. The RBI has introduced the RBI Retail Direct scheme to provide easier access for retail investors to G-Secs. Corporate bonds can be accessed by retail investors through stock exchange platforms, mutual funds, or direct placements, although participation might be lower compared to institutional investors or equity markets.
The debt market in India comprises government securities and corporate bonds. It caters to various types of investors ranging from large institutions to individual retail investors, each participating based on their investment objectives, risk appetite, and regulatory framework.