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. 086Why is India's corporate bond market so shallow relative to its equity market?Indian debt marketsHardsuperdayIndian debt capital marketsCredit research

   Say this

   Because almost all the demand sits with a few institutions that only buy the top of the rating scale, and almost all the supply is private placements by AAA and AA financial issuers. The outstanding stock is roughly 50 to 55 lakh crore rupees, a bit under 20 percent of GDP, against well over 100 percent in the US — and the gap is a demand problem more than a supply one.

   Then walk it

   1. The demand side is the binding constraint. Insurance companies, provident and pension funds dominate, and their investment regulations push them heavily into sovereign and AA-plus or better paper. Below AA there is almost no natural buyer, so the market has a cliff rather than a curve.
   2. Banks fill that gap with loans instead. A mid-rated corporate in India borrows from a bank, not from the bond market, because the bank will take the credit risk that no bond investor will. So bank credit crowds out the lower-rated bond market.
   3. Supply is concentrated too. The large majority of issuance is private placement rather than public issues, and financial sector issuers — NBFCs, housing finance companies, banks — account for a very large share. Genuine non-financial corporate issuance is a minority of the market.
   4. Secondary liquidity is the self-reinforcing part. Buy-and-hold institutions do not trade, so turnover is thin, so new investors price in illiquidity, so fewer participate. Trading is concentrated in a handful of recent AAA lines and everything else is effectively untraded.
   5. What has actually helped: the SEBI electronic bidding platform bringing price discovery to private placements, mandatory bond financing for large borrowers, the corporate bond repo and the Bharat Bond ETFs, RBI's backstop facility for debt funds after the 2020 Franklin Templeton episode, and rising foreign participation through the index inclusion of G-secs, which frees domestic capacity.
   6. The honest diagnosis: you cannot fix this with issuer-side reform alone. Until there is a large investor base willing and permitted to take A and BBB credit risk — insurance limits, pension rules, a credit fund industry — the market stays a AAA financing venue. That is the single point worth making.

   Where candidates lose it

   Blaming it on lack of issuer awareness or on regulation generally. The specific answer is the absence of a buyer base below AA, because institutional mandates prohibit it, and the resulting crowding out by bank lending. Have one size figure for the market and a rough percentage of GDP.

   Expect next

   • What would actually fix it?
   • Why do NBFCs dominate issuance?
   • What did the Franklin Templeton episode change?
2. 087What is an NCD, and how does a public NCD issue work in India?Indian debt marketsCoretechnicalIndian debt capital marketsCorporate banking

   Say this

   An NCD is a non-convertible debenture — a plain corporate bond under Indian law, so called to distinguish it from convertible debentures. It can be secured or unsecured, and it is issued either by private placement to institutions, which is most of the market, or by a public issue to retail investors under SEBI's debt listing regulations.

   Then walk it

   1. The private placement route is the market: a company with a board and shareholder authorisation issues to up to 200 identified investors per financial year per class, executes a debenture trust deed, and now must bid it on the electronic bidding platform above a size threshold. Listing on NSE or BSE follows, and settlement is through the depositories.
   2. The public issue route is what retail investors see. It needs a SEBI-filed prospectus, a credit rating, a debenture trustee, a minimum subscription, a fixed subscription window of a few days, and allocation across reserved categories — institutional, non-institutional, high net worth individual and retail.
   3. Who uses public issues: mainly NBFCs and housing finance companies, because they need retail funding and can offer coupons a few hundred basis points above bank deposits. Retail NCD issues from names like the large gold loan and vehicle finance NBFCs are a regular feature of the market.
   4. Secured versus unsecured matters here more than in a developed market. A secured NCD carries a charge over specific assets or a floating charge on receivables, with security cover — commonly 1 to 1.25 times — maintained through the life and certified periodically. Unsecured NCDs, especially subordinated ones that count as Tier II capital for an NBFC, are a different credit entirely.
   5. The trustee has real teeth post-2020 reforms: SEBI strengthened debenture trustee obligations on security creation, monitoring and enforcement after several defaults where security turned out to be incomplete.
   6. The risk to say honestly: a retail investor buying a 10 or 11 percent NCD from an NBFC is taking genuine credit risk at a rating that may be AA or lower, and the IL&FS and DHFL defaults showed what that means. High coupon in the Indian retail market is a credit signal, not a bargain.

   Where candidates lose it

   Treating an NCD as an exotic instrument. It is just a corporate bond, and the useful content is the private placement versus public issue distinction, the security cover mechanic and the trustee's role. Naming the NBFC defaults shows you understand why the retail investor protections were tightened.

   Expect next

   • Why do NBFCs dominate the retail NCD market?
   • What is security cover and who certifies it?
   • How is NCD interest taxed for a retail investor?
3. 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?
4. 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?
5. 090What is SEBI's electronic bidding platform, and what problem does it solve?Indian debt marketsHardtechnicalIndian debt capital marketsSyndicate desks

   Say this

   The EBP is an exchange-run electronic platform on which private placements of debt above a size threshold must be bid and allotted. It solved a transparency problem: private placements were previously negotiated bilaterally with no visible price discovery, so investors could not tell whether they were being fairly priced.

   Then walk it

   1. Mechanics: the issuer puts up a bid notice with the terms — size, tenor, coupon or spread, rating, security — a day or two ahead. Investors bid within a defined time window. Allotment follows a stated method, either uniform yield or multiple yield, and the results are published.
   2. The threshold has been progressively lowered by SEBI, so a large and growing share of private placements now goes through it rather than being done over the phone. Issues below the threshold, and certain categories, remain outside.
   3. What it fixed: before EBP, an NBFC could place paper with one institution at one yield and identical paper with another at 40 basis points different, and nobody would know. That opacity depressed participation, because an investor who cannot verify the price assumes they are the one being mispriced.
   4. Second benefit: it created a data trail. Published bid results give the market a series of primary levels for credits that otherwise never trade, which partially substitutes for the missing secondary market.
   5. The honest limits: EBP improves primary price discovery, it does not create secondary liquidity, and the underlying demand problem below AA is untouched. Issuers have also at times structured around the thresholds, and anchor investor arrangements can still effectively pre-determine an outcome.
   6. Where it fits in the reform set worth naming alongside it: the request-for-quote platform for secondary trades, corporate bond repo, the large-corporate mandatory bond financing framework, and the Bharat Bond ETFs. Together they are an attempt to build a market, and EBP is the piece that worked most clearly.

   Where candidates lose it

   Confusing EBP with a secondary trading venue. It is a primary issuance platform, and the separate RFQ platform handles secondary. Also, be honest that it fixed price discovery and not liquidity, because overclaiming on Indian market reform is easy to catch out.

   Expect next

   • What is the RFQ platform?
   • Does EBP improve secondary liquidity?
   • What is the large corporate borrowing framework?
6. 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?
7. 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.