New Debt Designs Needed

And it is not only the product that needs constant re-engineering. Issuers and merchant bankers also need to be aware of other factors like tax deduction at source on interest income which can affect an investors decision. Since retail investors have an aversion to paying tax at source, many limit their investments in order to escape the TDS net. Liquidity and safety are other concerns for investors. For savers with that profile, it may be prudent to introduce money market mutual funds so that both these needs can be satisfied. Another thing debt issuers have to realise is that unlike equity, where the unlimited growth potential of a stock drew investors to it in the primary market, there is no such overriding concern for debt investors. Too woo them, issuers have to identify the definite needs of investors and design products to cater to them. A standard design is unlikely to sell in the age of the fussy financial consumer.