PROFILE

Bharti AXA Life Insurance Co. Ltd. is a joint venture between Bharti, one of India's leading business groups in telecom, agricultural business and retail, and AXA, which is a global leader in financial protection and wealth management. Bharti Enterprises has been a pioneering force in the telecom sector with over 110 million customers while AXA major operations are based out of Western Europe, North America and the Asia/Pacific region. It also has operations in Australia, New Zealand, Hong Kong, Singapore, Indonesia, Philippines, Thailand, China, India and Malaysia. Bharti AXA Life Insurance is an entity jointly controlled by these two giants with Bharti holding 74% stake and AXA, the rest 26%. The company launched its operations in India In December 2006 and has be continuously expanding since then. Today, Bharti AXA Life Insurance is making its presence felt across the country and is catering to the insurance and wealth management needs of the people. Given below is a list of plans and financial solutions provided by Bharti AXA Life Insurance. Products Individual plans

Protection This plan takes care of all individual needs. The minimum sum assured is Rs. 2500000 with no limit on the maximum insurance cover. The Protection Plan covers people up to the age of 75 and provides several tax benefits complementary with this scheme. Further added protections of critical illness benefit, accidental death and disability benefit are also given. The plans and policies under this genre are: Bharti AXA Life Elite Secure Bharti AXA Life Secure Confident Bharti AXA Life Family Income Secure Bharti AXA Life Protect Plus Bharti AXA Life Premium Waiver Rider

y y y y y

Wealth Creation (With Protection) This genre of policies comes with a double advantage of financial protection for your family and a good investment option that ensures long term benefits. The Child Plans help you cover for the education and marriage of your children with a guaranteed money payback offer. There are also other options which are innovative and provide for market ups, but do not account for the market lows! Child Plans Bharti AXA Life Future Champs Bharti AXA Life Bright Stars EDGE. Guaranteed Plans Bharti AXA Life Save Confident Bharti AXA Life True Wealth Bharti AXA Life Aajeevan Anand. Bharti AXA Life Aajeevan Anand. Other Market Link Plans Bharti AXA Life WealthOne

y y y y y y y y y

Health Health Plans for individuals offer an extremely low premium of Rs. 3 per day and comprise of providing protective cover for accidental hospitalization and ICU treatments. Incidental hospital expenses like medical consultations or daily hospital cash are given by these policies offered by Bharti AXA. There is also a discount of 10% for each family member that you enroll. Bharti AXA Life EasyHealth

Retirement This plan helps in accumulating wealth for the retirement years with a guaranteed retirement amount and a vested retirement bonus too. At the time of vesting, there is an option of commuting 1/3rd of the amount received and 2/3rd can be used in purchasing an annuity. If there is a death during the policy term, 108% of the total premiums are payable to the immediate family. Individuals can choose from - an age '60 term or a 10 year term. Bharti AXA Life Wonder Years Retirement Plan

Group Plans Life Insurance Safeguarding your family against uncertainties is not a hard task with the Group Life Insurance plan offered by Bharti AXA. The Life Shield Policy secures every individual of the group by providing a low premium life insurance. The Life Sanjeevani is a single premium group term life insurance product that deems financial security and protection to your loved ones. Bharti AXA Life Shield Bharti AXA Life Sanjeevani

y y

Credit Protection This set of schemes covers for your absence in such a way that your family is not burdened with the repayment of loans. Bharti AXA Life pays the amount to settle this outstanding amount. There is another group product designed for customers of institutions and banks that protects the family in case of the loan borrower's death. Bharti AXA Life CreditSecure Bharti AXA Life Mortgage Credit Secure Bharti AXA Life Credit Shield Bharti AXA Life Premier Protect Home Shield

y y y y

Health This typically protects the group insured against 6 critical illnesses namely cancer, heart attack, by-pass surgery, loss of limbs, stroke and kidney failure. It is a single premium plan and can be useful for an individual or for the family. The Bharti AXA Life Swasthya Sanjeevani is one of the best policies offered by the Bharti AXA Life Insurance Co. Ltd. Bharti AXA Life Swasthya Sanjeevani

HISTORY
The company was founded by Sunil Bharti Mittal along with two siblings in 1976. The company was not so famous in India by its own name, rather its brand names like Airtel and Beetel (PSTN Phone Sets) are household names in India. The company underwent a brand reformation process and changed its logo and corporate Image.

Bharti AXA General Insurance Company

Bharti AXA General Insurance is a joint venture between Bharti Enterprises and AXA, world leader in financial protection and wealth management. The company was incorporated in July 2007.

Bharti AXA Life Insurance Company

Bharti AXA Life Insurance Company Ltd. is a joint venture between Bharti Enterprises and AXA, world leader in financial protection and wealth management. The company offers a range of life insurance and wealth management products.

DEBT MARKET:definition

The debt market is the market for trading debt securities. The debt market thus involves corporate bonds, government bonds, municipal bonds, negotiable certificates of deposit, and various money market investments. The debt market also includes individual loans bought from lenders and often packaged together in large amounts. The debt market includes the primary market, where debts are first sold to the public; and the secondary market, where investors sell debts to each other afterward. On the secondary debt market, debts can be sold on exchanges or on the over-the-counter market, but most are traded over the counter. Many debts are also packaged together into mutual funds. There are publications that publish the daily prices of bonds on the debt market.

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.

DEBT MARKET
Indian debt market can be classified mainly into two categories:

Government Securities Market (G-Sec Market): It consists of central and state government securities. It means that, loans are being taken by the central and state government. It is also the most dominant category in the India debt market.

Bond Market: It consists of Financial Institutions bonds, Corporate bonds and debentures and Public Sector Units bonds. These bonds are issued to meet financial requirements at a fixed cost and hence remove uncertainty in financial costs. 1.FIXED INCOME MARKET

Fixed income refers to any type of investment which is not equity, that obligates the borrower/issuer to make payments on a fixed schedule, even if the number of the payments may be variable. For example, if you lend money to a borrower and the borrower has to pay interest once a month, you have been issued a fixed-income security. Governments issuegovernment bonds in their own currency and sovereign bonds in foreign currencies. Local governments issue municipal bonds to finance themselves. Debt issued by government-backed agencies is called an agency bond. Companies can issue a corporate bond or get money from a bank through a corporate loan ("preferred stock" can be "fixed income" in some contexts). Securitized bank lending (e.g. credit card debt, car loans or mortgages) can be structured into other types of fixed income products such as ABS asset-backed securities which can be traded on exchanges just like corporate and government bonds. The term fixed income is also applied to a person's income that does not vary with each period. This can include income derived from fixed-income investments such as bonds and preferred stocks or pensions that guarantee a fixed income. When pensioners or retirees are dependent on their pension as their dominant source of income, the term "fixed income" can also carry the implication that they have relatively limited discretionary income or have little financial freedom to make large expenditures.

Fixed-income securities can be contrasted with equity securities that create no obligation to pay dividends, such as stocks. In order for a company to grow as a business, it often must raise money; to finance an acquisition, buy equipment or land or invest in new product development. Investors will give money to the company only if they believe that they will be given something in return commensurate with the risk profile of the company. The company can either pledge a part of itself, by giving equity in the company (stock), or the company can give a promise to pay regular interest and repay principal on the loan (bond, bank loan, or preferred stock). 2.CONSUMER DEBT MARKET In economics, consumer debt is outstanding debt of consumers, as opposed to businesses or governments. In macroeconomic terms, it is debt which is used to fundconsumption rather than investment The most common form of consumer debt is credit card debt, payday loans, and other consumer finance, which are often at higher interest rates than long term secured loans, such as mortgages. The amount of debt outstanding versus the consumer's disposable income is expressed as the Consumer Leverage Ratio. The interest rate charged depends on a range of factors, including the economic climate, perceived ability of the customer to repay, competitive pressures from other lenders, and the inherent structure and security of the credit product. Rates generally range from 0.25 percent above base-rate, to well into double figures. Consumer debt is also associated with Predatory lending, although there is much debate as to what exactly constitutes predatory lending. 3.CORPORATE BOND MARKET A corporate bond is a bond issued by a corporation. It is a bond that a corporation issues to raise money in order to expand its business.[1] The term is usually applied to longer-term debt instruments, generally with a maturity date falling at least a year after their issue date. (The term "commercial paper" is sometimes used for instruments with a shorter maturity.) Sometimes, the term "corporate bonds" is used to include all bonds except those issued by governments in their own currencies. Strictly speaking, however, it only applies to those issued by corporations. The bonds of local authorities and supranational organizations do not fit in either category.
[clarification needed]

Corporate bonds are often listed on major exchanges (bonds there are called "listed" bonds) and ECNs like Bonds.com and MarketAxess, and the coupon (i.e. interestpayment) is usually taxable. Sometimes this coupon can be zero with a high redemption value. However, despite being listed on exchanges, the vast majority of trading volume in corporate bonds in most developed markets takes place in decentralized, dealer-based, over-the-counter markets.

Some corporate bonds have an embedded call option that allows the issuer to redeem the debt before its maturity date. Other bonds, known as convertible bonds, allow investors to convert the bond into equity.
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4.Government bond market Government debt (also known as public debt, national debt, sovereign debt)[1][2] is money (or credit) owed by a central government. In the US, "government debt" may also refer to the debt of a Government bond market municipal or local government. By contrast, annual government deficit refers to the difference between government receipts and spending in a single year, that is, the increase of debt over a particular year. As the government draws its income from much of the population, government debt is an indirect debt of the taxpayers. Government debt can be categorized asinternal debt, owed to lenders within the country, and external debt, owed to foreign lenders. Governments usually borrow by issuing securities, government bondsand bills. Less creditworthy countries sometimes borrow directly from supranational institutions. A broader definition of government debt considers all government liabilities, including future pension payments and payments for goods and services the government has contracted but not yet paid. Another common division of government debt is by duration until repayment is due. Short term debt is generally considered to be one year or less, long term is more than ten years. Medium term debt falls between these two boundaries .

5.MONEY MARKET
The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit, federal funds, and short-lived mortgage-and asset-backed securities.[1] It provides liquidity funding for the global financial system.

Common money market instruments

 Certificate of deposit - Time deposits, commonly offered to consumers by banks, thrift institutions, and credit unions.

Repurchase agreements - Short-term loansnormally for less than two weeks and frequently for one dayarranged by selling securities to an investor with an agreement to repurchase them at a fixed price on a fixed date.

Commercial paper - Unsecured promissory notes with a fixed maturity of one to 270 days; usually sold at a discount from face value.

Eurodollar deposit - Deposits made in U.S. dollars at a bank or bank branch located outside the United States.

Federal agency short-term securities - (in the U.S.). Short-term securities issued by government sponsored enterprises such as the Farm Credit System, the Federal Home Loan Banks and theFederal National Mortgage Association.

Federal funds - (in the U.S.). Interest-bearing deposits held by banks and other depository institutions at the Federal Reserve; these are immediately available funds that institutions borrow or lend, usually on an overnight basis. They are lent for the federal funds rate.

Municipal notes - (in the U.S.). Short-term notes issued by municipalities in anticipation of tax receipts or other revenues.  Treasury bills - Short-term debt obligations of a national government that are issued to mature in three to twelve months. For the U.S., see Treasury bills.  Money funds - Pooled short maturity, high quality investments which buy money market securities on behalf of retail or institutional investors.  Foreign Exchange Swaps - Exchanging a set of currencies in spot date and the reversal of the exchange of currencies at a predetermined time in the future.  Short-lived mortgage- and asset-backed securities

DEBT INSTRUMENT:DEFINITION
A paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with terms of a contract. Types of debt instruments include notes, bonds, certificates, mortgages, leases or other agreements between a lender and a borrower. Debt instruments are a way for markets and participants to easily transfer the ownership of debt obligations from one party to another. Debt obligation transferability increases liquidity and gives creditors a means of trading debt obligations on the market. Without debt instruments acting as a means to facilitate trading, debt is an obligation from one party to another. When a debt instrument is used as a medium to facilitate debt trading, debt obligations can be moved from one party to another quickly and efficiently.

VARIOUS DEBT INSTRUMENTS

Types of Debt Instruments The various instruments of debt can be classified into long term and short term debt depending on the tenure for which the amount has been raised or the period of repayment. The various instruments under each category are mentioned below.

1.Bonds and Debentures Debt instruments can be further classified into the following categories based on the different characteristics with which they are floated in the market:

y y

Debentures Bonds

Debentures Main characteristics y y y y y y They are fixed interest debt instruments with varying period of maturity. Can either be placed privately or offered for subscription. May or may not be listed on the stock exchange. If listed on the stock exchanges, they should be rated prior to the listing by any of the credit rating agencies designated by SEBI. When offered for subscription a debenture redemption reserve has to be maintained. The period of maturity normally varies from 3 to 10 years and may also be more for projects with a high gestation period.

Bonds may be of many types - they may be regular income, infrastructure, tax saving or deep discount bonds. These are financial instruments with a fixed coupon rate and a definite period after which these are redeemed. The fundamental difference between debentures and bonds is that the former is normally secured whereas the latter is not. Hence in general bonds are issued at a higher interest rate than debentures. This avenue of financing is mainly availed by highly reputed corporate concerns and financial institutions. The three main kinds of instruments in this category are as follows:

y y y

Fixed rate Floating rate Discount bonds y y The bonds may also be regular income with the coupons being paid at fixed intervals or cumulative in which the interest is paid on redemption. Unlike debentures, bonds can be floated with a fixed interest or floating interest rate. They can also be floated without interest and are called discount bonds as they are issued at a discount to the face value and an investor is paid the face value on redemption.and if offered for longer terms are known as deep discount bonds. The main advantage with interest bearing bonds is the floating interest rate, which is stipulated based on certain mark-up over stock market index or some such index.

y y

From the point of view of the investor bonds are instruments carrying higher risk and higher returns as compared to debentures. This has to be kept in mind while floating bond issues for financing purposes. With the current buoyancy in capital markets for equity instruments the demand for corporate bonds is low.

2. Medium Term Loans

Medium term loans refer to loans extended for a period of between 2-5 years. The different purposes for which these loans are generally sought include: o o Short gestation projects: The short gestation projects could be for purchase of balancing equipment, for incremental expansion of capacity. Refinancing of loans in case of very long projects where the repayment of the term loans might occur prior to sufficient cash flows being generated by the project. For meeting any other medium term shortfall in funding arising out of an acquisition or bulleted repayment of a large loan, etc

The procedures for availing medium term loans, where required for short gestation projects, is largely similar to those required for project finance. In case of meeting a medium term mismatches not linked to a project or equipment, the financing decision would be on the basis of a cash flow analysis indicating the need for such medium term funding and an analysis of overall profitability and financial to the business to provide lender comfort. Other than these aspects, the procedures for availing Medium Term loans follows the requirements sought by the lenders in case of Project financing/ Long term lending. 3.Short term debt Short Term debt generally refers to debt raised for a period of less than a year. It can be classified into market instruments and financial assistance granted by Term Lending Institutions, Commercial Banks and Non Banking Finance Companies (NBFC) catering to the short term credit needs of the business entities.

Commercial Papers (CPs) CPs represent short term unsecured promissory notes issued by firms with a high credit rating. The maturity of these vary from 15 days to a year. They are sold at a discount to the face value and redeemed at the face value. CPs can be issued by companies, which have a minimum networth of Rs.4 crores and needs a mandatory credit rating of minimum A2 (ICRA), P2 (Crisil), D2 (Duff & Phelps) and PR2 (Credit Analysis & Research). The rating should not be more than 2 months old. It can be issued for a minimum amount of Rs.25 lakhs and more in multiples of Rs.5 lakh.

Inter-corporate Deposits (ICDs)

Inter-Corporate Deposits refers to unsecured short term funding raised by corporates from other corporates. This is a form of disintermediated financing, where corporates with surplus funding directly lend to those in need of funding of such funds and thereby save on the spreads that banks would have charged in borrowing from one to lend to the other. In theory this is an efficient means of channelising investment. However, the experience in the Indian context has been quite poor. The use of ICDs was extremely popular during the

early nineties when a number of companies raised money at hefty premiums from the public without actually identifying projects for investments. These sums were then deployed in the ICDs market where the borrowers more often than not invested in the booming financial assets (shares) or real estate. Often monies were lent to group companies for propping up the shares of different companies of the group. The end of the boom in financial and real assets saw significant amounts of defaults in ICDs and a virtual closure of the market.

4. Working capital: a)cash credit: b)working capital loan: c)bills financing: d)export finance: e)warehouse receipts:

There are various main types of debt instruments available that one can find in Indian debt market. Government Securities It is the Reserve Bank of India that issues Government Securities or G-Secs on behalf of the Government of India. These securities have a maturity period of 1 to 30 years. G-Secs offer fixed interest rate, where interests are payable semi-annually. For shorter term, there are Treasury Bills or T-Bills, which are issued by the RBI for 91 days, 182 and 364 days.

Corporate Bonds These bonds come from PSUs and private corporations and are offered for an extensive range of tenures up to 15 years. There are also some perpetual bonds. Comparing to G-Secs, corporate bonds carry higher risks, which depend upon the corporation, the industry where the corporation is currently operating, the current market conditions, and the rating of the corporation. However, these bonds also give higher returns than the G-Secs. Certificate of Deposit These are negotiable money market instruments. Certificate of Deposits (CDs), which usually offer higher returns than Bank term deposits, are issued in demat form and also as a Usance Promissory Notes. There are several institutions that can issue CDs. Banks can offer CDs which have maturity between 7 days and 1 year. CDs from financial institutions have maturity between 1 and 3 years. There are some agencies like ICRA, FITCH, CARE, CRISIL etc. that offer ratings of CDs. CDs are available in the denominations of ` 1 Lac and in multiple of that. Commercial Papers There are short term securities with maturity of 7 to 365 days. CPs are issued by corporate entities at a discount to face value.

COMPARISON OF DEBT INSTRUMENTS WITH OTHER MARKET INSTRUMENTS Corporate bonds vs govt. Bonds Corporate bonds
Corporate bonds. Companies sell debt through the public securities markets just as they sell stock. A company has a lot of flexibility as to how much debt it can issue and what interest rate it will pay, although it must make the bond attractive enough to interest investors or no one will buy them. Corporate bonds normally carry higher interest rates than government bonds because there is a risk that the company could go bankrupt and default on the bond, unlike the government, which can just print more money if it really needs it. High-yield bonds, also known as junk bonds, are corporate bonds issued by companies whose credit quality is below investment grade. Some corporate bonds are called convertible bonds because they can be converted into stock if certain provisions are met.

Govt bonds
State and local governments (munis). Because state and local governments can go bankrupt (ask the holders of Orange County, California, bonds if you don't believe that one), they have to offer competitive interest rates just like corporate bonds. Unlike corporations, though, the only way that a state can get more income is to raise taxes on its citizens, always an unpopular move. As a way around this problem, the federal government permits state and local governments to sell bonds that are free of federal income tax on the interest paid. State and local governments can also waive state and local income taxes on the bonds, so even though they pay lower rates of interest, for borrowers in high tax brackets the bonds can actually have a higher after-tax yield than other forms of fixed-income investments.

Stocks vs bonds
Stocks and bonds are very different in terms of risks and rewards. Each share of stock purchased represents ownership in a company. As part owner, you share profits as well as losses with that company, depending on its success or failure. This means that, though some stocks are safer than others, all stocks, by nature, carry some inherent risks to them. The flip side of this coin, of course, is that stocks have the potential of large returns and profits. When you purchase corporate bonds, on the other hand, you are basically loaning money to that corporation. You become one of their creditors, and in return you are given a fixed rate of interest over a fixed period of time. There is little risk of losing money when investing in bonds unless the company goes completely belly up, and even then, the risk of not being paid back is low. Of course, there is no potential for wild profits with bonds either.

The differences between stocks and bonds tend to complement each other, which is perhaps why they go so perfectly together. Most financial planners agree that a good investment portfolio should always contain both stocks and bonds

Bonds vs debentures
Bonds are more secure than debentures. As a debenture holder, you provide unsecured loan to the company. It carries a higher rate of interest as the company does not give any collateral to you for your money. For this reason bond holders receive a lower rate of interest but are more secure. Both bonds and debentures are instruments available to a company to raise money from the public. This is the similarity between the two, but on closer inspection, we find that there are many glaring differences between the two. Both bonds and debentures are instruments available to a company to raise money from the public. This is the similarity between the two, but on closer inspection, we find that there are many glaring differences between the two. Bonds are more secure than debentures. As a debenture holder, you provide unsecured loan to the company. It carries a higher rate of interest as the company does not give any collateral to you for your money. For this reason bond holders receive a lower rate of interest but are more secure. If there is any bankruptcy, bondholders are paid first and the liability towards debenture holders is less. Debenture holders get periodical interest on their money and upon completion of the term they get their principal amount back. Bond holders do not receive periodical payments. Rather, they get principal plus interest accrued upon the completion of the term. They are much more secure than debentures and are issued mostly by government firms. in Brief:

Bonds are more secure than debentures, but the rate of interest is lower Debentures are unsecured loans but carries a higher rate of interest In bankruptcy, bondholders are paid first, but liability towards debenture holders is less Debenture holders get periodical interest Bond holders receive accrued payment upon completion of the term Bonds are more secure as they are mostly issued by government firms

Debt vs equity
Bonds are debt, whereas stocks are equity. This is the important distinction between the two securities. By purchasing equity (stock) an investor becomes an owner in a corporation. Ownership comes with voting rights and the right to share in any future profits. By purchasing debt (bonds) an investor becomes a creditor to the corporation (or government). The primary advantage of being a creditor is that you have a higher claim on assets than shareholders do: that is, in the case of bankruptcy, a bondholder will get paid before a shareholder. However, the bondholder does not share in the profits if a company does well - he or she is entitled only to the principal plus interest. To sum up, there is generally less risk in owning bonds than in owning stocks, but this comes at the cost of a lower return.

Bonds vs stocks vs mutual funds

Bonds A bond is simply a loan, but in the form of a security, although terminology used is rather different. The issuer is equivalent to the borrower, the bond holder to the lender, and the coupon to the interest. Lets say as of Thursday's close, a 10 yr bond was priced to yield 4.07%. If you hold it for 10 years, that's your guaranteed return every year, locked in the day you bought it. It will not increase or decrease. At the end of the 10 years, you get your initial investment back, plus the interest guaranteed. Stocks A Stock is an instrument that signifies an ownership position (called equity) in a corporation, and represents a claim on its proportional share in the corporation's assets and profits. Stocks can yield higher return than bonds but they are more volatile as well. Some stocks and their return over a certain period is given below.

Stock Symbol HANS GOOG APPL YHOO

Company Hansen Natural Google Apple Inc. Yahoo

Time Period Sep 2005 - Sep 2007 Sep 2005 - Sep 2007 Sep 2005 - Sep 2007 Sep 2005 - Sep 2007

Return 410% 75% 180% -25%

However, some companies have gone completely bankrupt and investor lost all their investment. Some of those companies are Delta Airlines and Enron. Mutual Funds A mutual fund is a professionally-managed form of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. On average, mutual funds offer less returns than some of the stocks but more than bonds. However

mutual funds are less volatile than stocks but they are still more volatile than bonds. Some mutual funds have been known to yield about 10% a year on average for past 20 years.

Bonds vs bank loans

Bonds and bank loans are both forms of debt instruments. A creditor lends money in the form of the debt instrument to a borrower. The borrower repays the debt with interest over a specified period of time. Most bonds are not held to duration by the original lender and are sold on the secondary market. Most banks loans are held to duration with the exception of mortgages, which are often packaged together in bundles from which bonds are made. Mortgage bonds are sold on the secondary market. Bonds differ from bank loans in various ways:

1. Types
o

The major types of bonds are government, mortgage backed, municipal and corporate bonds. The federal government issues three main types of bonds: treasury bonds, treasury notes and treasury bills. They are sold on the primary and secondary markets. I-bonds and EE bonds are not sold on the secondary markets, but buyers can redeem them at any time. Mortgage backed bonds are rated based on the creditworthiness of underlying mortgages. Corporations and municipalities also issue bonds that are sold on primary and secondary markets. Banks offer clients mortgages, variable rate home equity lines and fixed rate home equity loans. Banks also write vehicle loans and commercial loans.

2. Function
o

Governments issue bonds to pay for services and infrastructure costs such as schools and roads. Bondholders are paid with money raised through taxation. Government revenue bonds fund utilities, and profits are used to pay bondholders. Corporations use bonds to finance expansions and development of new products. Banks issue loans to generate profits that cover operating expenses, technological upgrades, acquisitions and enable them to pay dividends to shareholders. Selling mortgage backed bonds also creates revenue.

3. Time Frame
o

Treasury bills have durations that range from a few days to a year. Treasury notes last for two, three, five, seven or 10 years and Treasury bonds last up to 30 years. Corporate and municipal bonds have durations of between five and 30 years. Standard mortgage terms are 15 and 30 years. Home loans last between 10 and 30 years, and car loans usually have terms no longer than six years. Business loans often have annually renewable terms but maximum durations of 10 or 20 years.

4. Considerations
o

Bond holders are creditors, and shareholders are owners. When a company files bankruptcy, after taxes and wages have been settled, creditors are paid before shareholders. In most bankruptcies, shareholders receive little or nothing, whereas bond holders often receive the money owed to them even if it takes several years to receive it.

Unlike bonds, most bank loans have tangible collateral than banks can seize if homeowners or car owners default on loans. Collateral means banks assume less risk than long-term bond holders even though rates on mortgages are usually higher than on 30 year bonds.

5. Warning
o

Many government and corporate bonds are callable, which means the issuing entity can pay off bondholders early. This impacts people who rely on bond interest for income. Bonds are usually called in during periods with falling rates, which makes it hard for bondholders to find news sources of comparable income. Banks cannot call in mortgages early unless borrowers default. People who buy bonds tied to mortgages run the risk of the mortgage borrowers choosing to payoff the loans early.

Debentures vs fixed deposits

Debentures and fixed deposits are two different ways of investing money. A debenture is an unsecured bond. Essentially, it is a bond that is not backed by a physical asset or collateral. Sometimes, debentures are issued with provisions that allow the holder to exchange the debenture for company stock. Nonconvertible debentures are unsecured bonds that cannot be converted to company equity or stock. Nonconvertible debentures usually have higher interest rates than convertible debentures. A fixed deposit is an arrangement with a bank where a depositor places money in the bank and is paid a regular fixed profit. The amount of profit or interest paid on the investment is fixed and will not increase or decrease at any time regardless of fluctuations in interest rate. The interest rate usually offered by fixed deposits is low compared to other investment forms because they are low-risk investments. Fixed deposits typically have maturities from two weeks to five years. Fixed deposits cannot be redeemed early. In other words, money cannot be withdrawn for any reason until the time-duration on the deposit has expired. If money is withdrawn early, then the bank can charge an early withdrawal penalty or fee. A very common example of a fixed deposit account is a certificate of deposit (CD).

Debentures vs shares
share:A unit of ownership interest in a corporation or financial asset. While owning shares in a business does not mean that the shareholder has direct control over the business's day-to-day operations, being a shareholder does entitle the possessor to an equal distribution in any profits, if any are declared in the form of dividends. The two main types of shares are common shares and preferred shares. Debenture:A certificate or voucher acknowledging a debt. An unsecured bond issued by a civil or governmental corporation or agency and backed only by the credit standing of the issuer. Difference:A debenture is an unsecured loan you offer to a company. The company does not give any collateral for the debenture, but pays a higher rate of interest to its creditors. In case of bankruptcy or financial difficulties, the debenture holders are paid later than bondholders. Debentures are different from stocks and bonds, although all three are types of investment. Below are descriptions of the different types of investment options for small investors and entrepreneurs. Debentures and Shares

When you buy shares, you become one of the owners of the company. Your fortunes rise and fall with that of the company. If the stocks of the company soar in value, your investment pays off high dividends, but if the shares decrease in value, the investments are low paying. The higher the risk you take, the higher the rewards you get. Debentures are more secure than shares, in the sense that you are guaranteed payments with high interest rates. The company pays you interest on the money you lend it until the maturity period, after which, whatever you invested in the company is paid back to you. The interest is the profit you make from debentures. While shares are for those who like to take risks for the sake of high returns, debentures are for people who want a safe and secure income.

Regulators of debt market

Considering the volumes in this market, it was imperative that there had to be regulations governing this market. The RBI is the main regulator of this market and SEBI playing a second fiddle. Actually, the RBI has diverse roles to play in the debt market. It is the regulator, it is the issuer of securities in the market (it issues G - secs on behalf of Govt.), it has to manage the GoI's borrowing program, it has to check the volatility in the market through its open market operations and it determines the interest rate policy. 1.rbiThe RBI determines the guidelines as to how the commercial banks can raise money from the general public. It controls the credit extended by the banks through its policies on CRR, SLR, priority sector lending, asset liability management (ALM), its refinance rate and its open market operations (OMO). Its policies on CRR and SLR determine the extent of bank investments in G - secs, the amount of liquidity available in the system and have a profound effect on the interest rates prevalent in the economy. Its guidelines on deployment of surplus funds by banks determine the amount of money going to different sectors of the economy. Its guidelines on ALM determine the level of bank investment in various debt securities. Since the time, Indian economy has moved to market determined interest rates, the cutoff rate for G - secs auction, bank rate, repo rates, CRR and SLR set the benchmark for the interest rates in the economy. These set a floor rate for the interest rates in the economy. They form the basis for the entire yield curve. Also it monitors interest rates in the economy through its OMO. The SEBI gets involved in the debt market when an entity raises money from the individual investors through public issue. As the volume of public debt issues raising money from individual investors is very small, SEBI plays a second fiddle to the RBI. It determines the guidelines for raising money through public issues like disclosures to be made, to disclose risks involved in the issue, terms and conditions of the issue etc. SEBI is also the main regulator for Mutual Funds (only Money Market Mutual Funds come under the purview of the RBI) and it also regulates the FII investment in the debt market. Apart from these two main regulators, there are different regulators for specific investors. For example, the Central Provident Funds commissioner regulates the Provident Funds. The respective statutes of the LIC and GIC, under which they were established, regulate them.