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SEBI plans bond ETFs, debt market reforms to boost retail participation

(27-May-26   13:09)

Securities and Exchange Board of India Chairman Tuhin Kanta Pandey said the regulator is working on developing bond exchange traded funds (ETFs), derivatives linked to corporate bond indices and a market-making framework to improve retail participation and liquidity in India's debt market.

Speaking at an event in Mumbai on Tuesday, Pandey said SEBI is also exploring a separate regulatory classification for debt brokers to reduce costs and encourage specialised intermediaries in the bond market.

He added that SEBI is examining a pilot project for tokenisation of corporate bonds to enable faster settlement, improved traceability, automated servicing and greater transparency in the debt market.

Pandey said India's corporate bond market has expanded significantly, with outstanding corporate bonds rising from around Rs 17.5 lakh crore at the end of FY16 to over Rs 59 lakh crore currently. In FY26, debt issuers mobilised around Rs 9.1 trillion, nearly double the amount raised through equity issuances.

However, he noted that retail participation in corporate bonds remains low. According to a SEBI investor survey, awareness of corporate bonds stands at just 10%, while household penetration remains below 1%.

Pandey also said SEBI is reviewing the municipal debt framework to support pooled financing for municipal bodies and improve retail participation in municipal bonds. He added that the future of India's bond market lies in reforms spanning market-making, municipal bonds, securitisation, bond indices, derivatives, tokenisation and investor education.

According to a report, India's bond market remains largely dominated by government securities, with general government debt securities accounting for 55.4% of the country's GDP.

At the event, Ashishkumar Chauhan said India's ambition of becoming a developed economy by 2047 would require investments to rise above 35% of GDP, making corporate bonds an important source of capital alongside bank credit.