Debt Capital Markets interview preparation

Questions

100

Traced to a firm

45

Firms

26

Updated

September 2026

Asked at

All firmsTSTruist Securities5PIMCO4TD Securities4Apollo Global Management3Nomura3Scotiabank3Bain Capital2Houlihan Lokey2Mizuho2Neuberger Berman2Oaktree Capital Management2RCRBC Capital Markets2Carlyle Group1Deutsche Bank1Golub Capital1HPS Investment Partners1Invesco1KKR1Lazard1Moelis & Company1Moody's1Northern Trust1NUNuveen1Rothschild & Co1S&P Global1Wells Fargo Securities1

Topic

All topicsBond mechanics11Duration and convexity6Yield curve and rates5Credit spreads5Credit analysis and ratings13Credit modelling9Primary issuance9Syndication and loans10Structured credit7Covenants and documentation5Liability management5Indian debt markets7Fit8

Level

AnyCoreIntermediateHard

Type

AnyTechnicalBrainteaserMarket viewCaseFit

1. 088Walk me through the Indian government securities curve. Who issues, who buys, and what drives it?Indian debt marketsIntermediatetechnicalIndian debt capital marketsFixed income asset management

   Say this

   The RBI issues G-secs on behalf of the central government through weekly auctions, running from 91-day treasury bills out to 40 years. Banks, insurers and provident funds are the dominant buyers, largely because they are required to be. The curve is driven by the RBI's policy rate, the government's borrowing calendar, and since 2024 by foreign flows through global bond index inclusion.

   Then walk it

   1. Supply mechanics: a half-yearly borrowing calendar, weekly auctions conducted on the RBI's electronic platform, with primary dealers obliged to bid and to underwrite. State governments issue separately as state development loans, which trade at a spread of typically 30 to 70 basis points over the comparable central G-sec.
   2. Demand is structurally captive. Banks must hold a statutory liquidity ratio of government securities, insurers and provident funds have prescribed minimum allocations, and that mandated demand is why India can fund a large deficit at moderate yields with a shallow corporate market.
   3. The 10-year benchmark is the reference point for everything else. Corporate bonds are quoted as a spread over the comparable G-sec, so the curve is the pricing backbone of the whole debt market, just as Treasuries are in the US.
   4. Drivers: the repo rate and the RBI's stance, inflation prints and the monetary policy committee's 4 percent target with a 2 to 6 percent band, the fiscal deficit and the gross borrowing number in the Budget, banking system liquidity, and crude oil, because India imports most of its energy and that feeds both inflation and the current account.
   5. The 2024 change worth knowing: inclusion of Indian G-secs in JP Morgan's emerging market bond index, and subsequently others, brought substantial passive foreign inflows for the first time. That has compressed yields, lengthened the buyer base, and also introduced a new source of volatility from global flows.
   6. The honest caveat: because so much demand is mandated, the curve is not a pure market signal about growth or inflation in the way the US curve is. Regulatory allocation and RBI liquidity operations can move it independently of fundamentals.

   Where candidates lose it

   Describing it like the Treasury market. The distinctive Indian features are the captive regulatory demand through SLR and insurance mandates, the state development loan spread, and the 2024 index inclusion. Without those the answer is generic and could be about any sovereign.

   Expect next

   • What did index inclusion change?
   • Why do SDLs trade wide of central G-secs?
   • How does the SLR requirement affect bank behaviour?
2. 089How do CRISIL, ICRA and CARE ratings compare to Moody's and S&P, and why can't you compare them directly?Indian debt marketsIntermediatetechnicalIndian debt capital marketsRating agencies

   Say this

   The Indian agencies rate on a national scale, which is calibrated within India and effectively anchored to the sovereign. So an Indian AAA is the best credit in India, not the equivalent of a global AAA — the sovereign itself is around BBB minus on the global scale, so a domestic AAA maps to somewhere around BBB globally.

   Then walk it

   1. The main agencies: CRISIL, majority owned by S&P; ICRA, majority owned by Moody's; CARE, independent; India Ratings, owned by Fitch; plus Brickwork, Acuite and Infomerics. All are SEBI-registered credit rating agencies, and RBI separately accredits agencies for bank capital purposes.
   2. The national scale is the key concept. It ranks credits relative to each other within one country, with the top of the scale pinned to the strongest domestic credits. It says nothing about cross-border comparability, which is why a company rated AAA domestically may be unrated or low investment grade internationally.
   3. So the comparison rule: use the global scale rating if you need to compare across countries, and remember the sovereign ceiling — very few corporates are rated above their sovereign, and those that are have genuinely offshore cash flows.
   4. The credibility issues to acknowledge honestly: IL&FS was rated AAA shortly before defaulting in 2018, and DHFL similarly. SEBI responded with disclosure of rating rationales and sharp rating actions, standardised probability of default benchmarks, mandatory disclosure of rating transition and default rates, and rules on rating withdrawal and issuer non-cooperation.
   5. Practical reading discipline: check whether a rating is on watch or has a negative outlook, look at the rating history rather than the point-in-time letter, look for the issuer-not-cooperating flag, and read the rationale for what the agency says about liquidity, because in India liquidity is what kills issuers rather than leverage.
   6. The genuinely useful part: because bank loan ratings are mandatory, India has rating coverage of tens of thousands of entities, most of them small and private. That is a data asset with no real parallel elsewhere.

   Where candidates lose it

   Treating an Indian AAA as a global AAA. That is the single error this question exists to catch. Name the national scale, the sovereign anchor, and then the IL&FS episode, because an interviewer will otherwise ask whether you trust the ratings at all.

   Expect next

   • What went wrong with IL&FS?
   • What does issuer-not-cooperating mean?
   • Why does India have so many rated entities?
3. 091What is a masala bond, and why did issuance largely dry up?Indian debt marketsIntermediatetechnicalIndian debt capital markets

   Say this

   A masala bond is a rupee-denominated bond issued offshore, so the issuer borrows in rupees and the foreign investor takes the currency risk. Issuance dried up because the investor base was never deep, the all-in cost after the rupee risk premium was rarely better than domestic funding, and RBI's caps and the withholding tax treatment removed the remaining advantage.

   Then walk it

   1. The structure's whole point: an Indian issuer with rupee cash flows avoids the currency mismatch that killed so many emerging market borrowers. Unlike a dollar bond, depreciation does not increase the debt service burden.
   2. That risk has to go somewhere, and it went to the offshore investor, who priced it. So masala coupons were high — often 7 to 8 percent or more — and the issuer was effectively paying the market's view of rupee depreciation plus a premium for taking an unhedged position.
   3. Who used it: IFC issued the first ones, then HDFC, NTPC, the Indian Railway Finance Corporation and several state entities, and a notable green masala from NTPC. Total issuance peaked around 2016 to 2017 and then faded.
   4. Why it faded. First, arithmetic: once you compared the masala coupon against domestic NCD pricing for the same issuer, the saving was thin or negative. Second, the RBI's external commercial borrowing framework capped pricing and minimum maturities, which constrained the structures that would have worked. Third, the withholding tax concession that made them attractive was allowed to lapse and then applied unevenly.
   5. Fourth, the demand side was always narrow. Very few global funds want unhedged rupee exposure in a bond format, and those that do can now buy Indian government securities directly following index inclusion, which is a better instrument for the same trade.
   6. Which is the real answer to the question: index inclusion of G-secs gave foreign investors a liquid, sovereign-risk way to take rupee duration. That is a straightly better product than an illiquid offshore corporate rupee bond, so the niche closed.

   Where candidates lose it

   Describing the mechanics and stopping. The question is why they failed, and the answer is that the currency risk premium the offshore investor demanded exceeded the funding saving, plus the demand base has since been better served by direct G-sec access. Naming actual issuers makes it concrete.

   Expect next

   • Who bore the currency risk and how did they price it?
   • How does the ECB framework constrain this?
   • Would a green masala bond work better?
4. 092Roughly how large is India's outstanding corporate bond market? Reason it out.Indian debt marketsIntermediatetechnicalIndian debt capital marketsCredit research

   Say this

   Around 50 to 55 lakh crore rupees, so roughly 600 to 650 billion dollars, which is a bit under 20 percent of GDP. Get there from GDP: India's GDP is about 330 lakh crore rupees, and the corporate bond market has been running in the high teens as a share of it.

   Then walk it

   1. Anchor on GDP first, because it is the number you are most likely to know: about 330 lakh crore rupees, or roughly 4 trillion dollars.
   2. Then the ratio. Bank credit to the commercial sector in India is roughly 50 to 55 percent of GDP, and the corporate bond market is well under half that. High teens as a percentage of GDP gets you to 50 to 60 lakh crore.
   3. Cross-check with the issuance flow. Annual private placement issuance has been running around 8 to 10 lakh crore rupees, and with an average tenor of roughly five years, the steady-state outstanding stock is five times annual issuance, which lands you in the same 40 to 50 lakh crore region. Two independent routes agreeing is the point of the exercise.
   4. Comparison for scale: the US corporate bond market is over 100 percent of GDP, and even Malaysia and Korea run far higher ratios than India. So India is an outlier low, which is the substance behind the depth problem.
   5. Composition matters as much as size: the large majority is private placement rather than public issue, and financial sector issuers are a very large share of it. So the genuine non-financial corporate bond market is a good deal smaller than the headline.
   6. And be honest about the range. I would quote it as roughly 50 lakh crore, say which year, and say I would confirm from the SEBI or RBI data rather than pretend to a precise figure.

   Where candidates lose it

   Guessing a number with no derivation. The estimation route is what is being marked, so anchor on GDP, apply a ratio, then cross-check against issuance flow times average tenor. And use consistent units — mixing lakh crore and billions of dollars mid-answer loses the interviewer.

   Expect next

   • How does that compare to bank credit in India?
   • Why is it so much smaller than the US market?
   • How much of it is financial sector issuance?

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.