Securities and Exchange Board of India (SEBI) is making efforts to develop bond ETFs and derivatives on corporate bond indices to improve retail investor participation in the bond market. 

“We are working towards further developing bond ETFs and derivatives on corporate bond indices. These can improve liquidity, allow retail investors to access debt markets with smaller ticket sizes, and help institutions hedge interest-rate risks,” said SEBI Chairperson Tuhin Kanta Pandey while addressing a debt-market event here. He further said that the regulator was “exploring a distinct regulatory classification for debt brokers.” 

“This can lower costs, reduce entry barriers and encourage dedicated debt-market intermediaries,” he continued.

Listing regulations under the SEBI Act may also be relaxed for debt-listed entities in comparison to the equity-listed entities. “Currently, LODR [Listing Obligations and Disclosure Requirements] obligations for pure debt-listed entities are similar to equity-listed entities. The review will be to relax some of these LODR obligations for pure debt-listed entities. We will take up this review in due course,” he continued. 

Speaking about the need for improving the bond markets in India, he said that India’s financing model for businesses was  still predominantly bank-led and a growing economy needs “patient debt capital that can help finance long gestation projects.

The Indian bond market now suffers from a concentration of top quality bonds, shallow issuer base, lower secondary-market liquidity and low retail participation. SEBI’s efforts are directed to towards making these instruments attractive, especially when equity markets have started becoming less certain for retail investors in terms of returns.