In its annual report for 1998-99, the Reserve Bank has raised the issue since the private placement market does not come under the disclosure and protection of investor interest norms of the Securities & Exchange Board of India (Sebi) even though most of the issues are rated by the credit rating agencies.

"Default risk to investors could be a potential problem which may pose systemic risks if the investors involved happened to be large financial institutions," observed the Reserve Bank.

During 1998-99, banks, financial institutions and private-sector companies raised Rs 49,664 crore or 84.1 per cent of the total resources raised from the primary market. This was higher by over 60 per cent than the amount of Rs 30,099 crore raised during the preceding fiscal.

The public-sector accounted for 41 per cent of thetotal amounts raised in 1998-99 while 24.8 per cent was contributed by non-financial private sector. Resource mobilisation by the private-sector nearly doubled to Rs 16.983 crore in 1998-99 from the Rs 9,202 crore in 1997-98 with the private financial sector accounting for 24.5 per cent of total mobilisations.

Debt instruments, mostly bonds and debentures constituted 95.3 per cent of the total amount raised by way of private placements.