Historically, the key obstacle to the development of the corporate debt market has been the competition for long term investment alternatives from the NSS instruments, which offer zero risk yields higher than returns on corporate bonds.
In order to align NSS rates with marketbased yields on instruments of similar tenors, the yields on NSS instruments were first reduced, and then pegged to the yields on the government’s market-based long term bonds. From March 2000, institutional investors were barred from incremental investment in NSS. These measures helped in developing bond market to some extent as the number of issuance increased subsequently.