Capital markets more important than banks for economic revival

Capital markets more important than banks for economic revival

Topic: Economy

In News: The Survey says that capital markets have been more important than banks for the economy’s revival in the current fiscal.

About:

• It pointed out that the current financial year proved to be exceptional for primary markets with a boom in fund-raising through IPOs by many new-age companies/tech start-ups/unicorns.
• In 2021-22, the risk capital (that is money raised from capital markets) has so far been more important than the banks in providing finance to the revival. Overall, debt mobilisation slowed, in contrast with the equity market said the Survey.
• Corporate bonds
  • On the debt side, funds raised through corporate bonds was around ₹3.7-lakh crore in April- November 2021 which declined compared to ₹4.9-lakh crore mobilised during April-November 2020.

A primary market is a source of new securities. Often on an exchange, it’s where companies, governments, and other groups go to obtain financing through debt-based or equity-based securities.

• In the primary market, new stocks and bonds are sold to the public for the first time.
• In a primary market, investors are able to purchase securities directly from the issuer.
• Types of primary market issues include an initial public offering (IPO), a private placement, a rights issue, and a preferred allotment.
• Stock exchanges instead represent secondary markets, where investors buy and sell from one another.
• After they’ve been issued on the primary market, securities are traded between investors on what is called the secondary market—essentially, the familiar stock exchanges.