India’s market regulator is preparing a broad push to deepen the country’s corporate bond market, with reforms spanning retail participation, market liquidity, municipal debt financing and tokenised corporate bonds emerging as key focus areas in the next phase of debt-market development.
Speaking at the CareEdge Debt Summit on Tuesday, the SEBI Chairman Mr. Tuhin Kanta Pandey said the objective is to build “A deeper, more liquid and more trusted Indian debt market” that can increasingly complement the banking system in financing long-term economic growth.
The remarks come at a time when India’s corporate bond market has expanded significantly in size but continues to remain concentrated among highly rated issuers and financial sector entities. Outstanding corporate bonds have increased from around ₹17.5 trillion in FY15 to over ₹59 trillion currently, while FY26 issuances stood at ₹9.1 trillion, according to figures cited during the address.
Despite the growth, participation remains narrow. Nearly 85-90% of issuances continue to be rated AAA or AA, while close to 70% of outstanding bonds originate from financial sector issuers. Of approximately 6,000 listed companies in India, only 776 currently have listed debt securities.
Retail participation also remains limited. According to SEBI’s Investor Survey referenced during the speech, awareness of corporate bonds stands at roughly 10%, while household participation in the segment remains below 1%, despite increasing retail engagement in broader capital markets.
The observations reflect a wider regulatory effort underway at SEBI to strengthen market-based financing channels and reduce excessive dependence on bank-led credit intermediation.
Push Towards Wider Market Participation
A significant part of the regulator’s current strategy appears focused on improving accessibility for both issuers and investors.
SEBI has already reduced minimum investment sizes for corporate bonds to make fixed-income products more accessible to smaller investors. Online Bond Platform Providers (OBPPs) have also been brought under a formal regulatory framework as the regulator seeks to expand digital participation while maintaining investor safeguards.
At the institutional level, the Electronic Bidding Platform (EBP) framework has been expanded and thresholds lowered, increasing the number of debt issuances routed through transparent electronic bidding mechanisms.
The regulator indicated that these changes are intended to improve price discovery, transparency and participation in the debt market ecosystem.
Secondary Market Liquidity Showing Early Improvement
The address also highlighted improving activity in the secondary corporate bond market, an area that has historically remained underdeveloped relative to the size of primary issuances.
Secondary market trades increased from around 1.2 million in FY25 to 2.8 million in FY26, while traded value rose from approximately ₹17 trillion to ₹22 trillion.
Request-for-Quote (RFQ) platform activity also expanded significantly during the period, with the number of RFQ trades increasing from 0.3 million to around 1.8 million and traded value rising from ₹5 trillion to ₹7.3 trillion.
The regulator also pointed to growth in digital bond distribution platforms. Registered client bases on Online Bond Platform Providers increased from around 0.6 million to 1.5 million, while transaction values rose from ₹71 billion to ₹260 billion.
Alongside this, the repo ecosystem has also expanded, with ARCL reportedly clearing cumulative volumes of around ₹12 trillion, strengthening funding and collateral efficiency within the broader debt market infrastructure.
Market participants view these indicators as signs of gradual improvement in liquidity and electronic trading participation, although secondary market depth remains uneven across issuers and rating categories.
Tokenised Bonds, ETFs and Market-Making Framework
Among the more notable developments discussed during the summit was SEBI’s exploration of a pilot framework for tokenised corporate bonds.
According to the Chairman, the pilot would examine whether tokenisation can improve settlement efficiency, transparency, servicing and traceability across the lifecycle of debt securities.
The regulator indicated that innovation would continue to be encouraged where it delivers measurable operational efficiency while remaining within investor-protection safeguards and market-integrity standards.
If implemented successfully, tokenised bonds could potentially enable fractional participation, improve auditability and widen investor access to fixed-income products.
SEBI is also working with the Reserve Bank of India and the Finance Ministry on operationalising the market-making framework announced in the Union Budget. The objective is to improve two-way quoting, reduce spreads and support more reliable liquidity in corporate bonds.
In parallel, the regulator plans to deepen the market for bond ETFs and derivatives linked to corporate bond indices. These instruments are expected to provide investors with diversified exposure to fixed-income markets while offering institutions additional hedging tools.
Retail Awareness and SME Participation in Focus
The regulator also used the platform to emphasise the importance of expanding participation beyond institutional investors and highly rated issuers.
According to the Chairman, retail participation in bonds is unlikely to increase solely through product availability and will require greater investor understanding of fixed-income instruments and associated risks.
SEBI’s “Project Jagrook” initiative is expected to play a central role in this effort through investor awareness campaigns focused on bond-market education.
At the issuer level, SEBI and stock exchanges are planning outreach programmes aimed at SMEs and companies considered “debt ready” but which have not yet accessed listed debt markets.
The regulator is additionally reviewing whether debt-only listed entities should continue to face disclosure and compliance requirements similar to equity-listed companies under the LODR framework. The move could potentially lower compliance costs for issuers entering the debt market while maintaining transparency standards.
Municipal Bonds Emerging as a Parallel Priority
Beyond corporate debt, SEBI also signalled renewed focus on municipal bond markets as part of broader efforts to diversify long-term financing channels.
The Municipal Debt Securities framework is currently under review to facilitate urban infrastructure financing, pooled municipal borrowing structures and wider investor participation.
The initiative comes as India’s urban infrastructure requirements continue to expand significantly, increasing pressure on governments to develop alternative long-term financing mechanisms beyond traditional bank funding and state budget allocations.
Analysts say the regulator increasingly views municipal bonds, securitised debt instruments and corporate bonds as interconnected components of a broader market-based financing ecosystem.
Shift Towards Market-Based Financing
The broader direction of SEBI’s policy approach suggests an increasing focus on improving the depth, diversity and resilience of India’s debt markets rather than merely expanding issuance volumes.
The regulator also indicated that it is evaluating the possibility of introducing a separate regulatory classification for debt brokers in an effort to encourage specialised intermediaries and lower entry barriers within the market ecosystem.
Throughout the address, SEBI maintained that investor protection and market integrity would remain central to the reform process even as the regulator pushes for innovation and wider market participation.
Taken together, the initiatives indicate that India’s debt-market reforms are moving beyond incremental regulatory adjustments towards a more structural effort aimed at strengthening long-term capital formation, improving secondary market efficiency and broadening access to market-based financing.
As India’s financial system evolves, policymakers increasingly appear to view a deeper corporate bond market not only as a financing alternative to banks, but as a necessary pillar for supporting infrastructure expansion, private-sector investment and long-term economic growth.
