UGC Approved Journal no 63975(19)

ISSN: 2349-5162 | ESTD Year : 2014
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Published in:

Volume 5 Issue 8
August-2018
eISSN: 2349-5162

UGC and ISSN approved 7.95 impact factor UGC Approved Journal no 63975

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Published Paper ID:
JETIRA006170


Registration ID:
186640

Page Number

948-960

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Title

AN EVALUATION OF THE DEVELOPMENT AND GROWTH POTENTIAL OF CREDIT DEFAULT SWAP MARKET IN INDIA

Abstract

A booming domestic economy and low default rates in the last decade had led banks to lend quite aggressively. Between 2001 and 2010, the total asset size of the Indian banking industry grew by 18% per year on average, from $250 billion to $1.3 trillion. The annual rate of credit growth was 23% during 2007-2012, according to the India Brand Equity Foundation. During this period, banks warehoused credit risk. With the massive NPA provisioning undertaken by most PSUs, including the likes of SBI and PNB, a mechanism of credit risk management seems indispensable. Credit Default Swaps, a basic credit derivative product seems the right product at this point of time. There are two schools of thought. One says Credit Derivatives are good and would help the banks in improving their balance sheets. The other school thinks differently. They say as a banker it is the responsibility of the bank to be well aware of the risk it is taking. With the advent of credit derivatives, the banks will be able to shift the credit risk and as such will not scrutinize the credit proposition as well as they should; because they can easily transfer the credit risk by using credit derivatives. At this juncture, it becomes necessary to identify the problems and prospects for the growth of Credit Default Swaps market in India. Also an effort needs to be made in the direction of learning from the international experiences and finally the customization of the product and strategy for Indian participants. With these points in mind the researcher has conducted a study with the specific title – An evaluation of the development and growth potential of Credit Default Swap Market in India. As per this study, Credit Derivatives are picking slowly in India but the urgency is not yet felt. Corporates in India do not find bond finance an attractive option. It is basically due to a historical dependence on bank finance coupled with high cost of bond issuance and lack of familiarity with the processes and risks involved. A correction in this trend is highly anticipated. Last but not the least, it is important to appreciate that credit risk is not limited to corporate bonds. It is associated with sovereign bonds also as depicted in the European sovereign debt crisis. Considering that FIIs are allowed to invest in Indian bonds and associated risks with rating downgrades; the markets are becoming increasingly vulnerable. Credit Derivatives can be a great saviour in these conditions and can help the bond markets to flourish.

Key Words

Credit Default Swaps, Corporate Debt Markets, Credit Event, Credit Risk

Cite This Article

"AN EVALUATION OF THE DEVELOPMENT AND GROWTH POTENTIAL OF CREDIT DEFAULT SWAP MARKET IN INDIA", International Journal of Emerging Technologies and Innovative Research (www.jetir.org), ISSN:2349-5162, Vol.5, Issue 8, page no.948-960, August-2018, Available :http://www.jetir.org/papers/JETIRA006170.pdf

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2349-5162 | Impact Factor 7.95 Calculate by Google Scholar

An International Scholarly Open Access Journal, Peer-Reviewed, Refereed Journal Impact Factor 7.95 Calculate by Google Scholar and Semantic Scholar | AI-Powered Research Tool, Multidisciplinary, Monthly, Multilanguage Journal Indexing in All Major Database & Metadata, Citation Generator

Cite This Article

"AN EVALUATION OF THE DEVELOPMENT AND GROWTH POTENTIAL OF CREDIT DEFAULT SWAP MARKET IN INDIA", International Journal of Emerging Technologies and Innovative Research (www.jetir.org | UGC and issn Approved), ISSN:2349-5162, Vol.5, Issue 8, page no. pp948-960, August-2018, Available at : http://www.jetir.org/papers/JETIRA006170.pdf

Publication Details

Published Paper ID: JETIRA006170
Registration ID: 186640
Published In: Volume 5 | Issue 8 | Year August-2018
DOI (Digital Object Identifier):
Page No: 948-960
Country: -, -, -- .
Area: Engineering
ISSN Number: 2349-5162
Publisher: IJ Publication


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