New Financial Instruments in Indian Financial System

Abstract: The Indian financial system has undergone a significant transformation in the 1990s. the deregulation of lending rates, free pricing of equity issues, entry of private sector institutional investors including foreign institutional investors, opening up of the banking sector to the private sector, allowing Indian companies to directly tap the foreign capital markets, and so on are some of the major reforms which have changed the scenario of the Indian financial system. This new found freedom has increased competition in the Indian corporate sector. This paper aimed at the main objectives of new financial instruments such as floating rate bonds, Zero interest bonds, deep discount bonds, revolving under writing finance facility, auction rated debentures, secured premium notes with detachable and separately tradable warrants, fully convertible debentures with interest, differential shares, securitized paper, collateralized debt obligations and inverse float bonds, perpetual bonds and municipal bonds.

Keywords: Floating Rate Bonds, Zero Interest Bonds, Deep Discount Bonds, Auction Rated Debentures, Differential Shares, Securitized Papers, Pass Through Certificates, Collateralized Debt Obligations.