The coroporate bond market is but to take off
| Picture Credit score:
Dzmitry Skazau
Reserve Financial institution of India Governor Sanjay Malhotra identified lately that the full stream of credit score from non-bank sources had elevated by ₹4.3 lakh crore in 2024-25, serving to mitigate the affect of slowing financial institution credit score to the non-public sector. With the company bond market being one of many key elements of non-bank funding, it’s nicely that SEBI is aiding the RBI in attempting to enhance exercise on this section. Two session papers lately launched by SEBI are targeted on encouraging extra firms to faucet the bond market.
Regardless of continued efforts by regulators through the years, company bond market stays illiquid with very meagre exercise. It is because each finance and non-finance firms favor the non-public placement route for bond issuances, as it’s faster and simpler to shut. However the variety of patrons is extraordinarily small in non-public placements, thus impairing participation. Whereas round ₹9.9 lakh crore was raised by the company bond market in FY25, virtually your complete fund elevating befell by non-public placement. The scenario persists within the first half of FY26 with virtually your complete ₹5 lakh crore being raised by non-public placements. With institutional traders, firms and HNIs who subscribe by these non-public placements not actively buying and selling these securities, liquidity on the trade platforms could be very low.
In July 2024, SEBI had decreased the minimal face worth of privately positioned bonds to ₹10,000 from ₹1 lakh to encourage retail participation. One of many session papers launched lately proposes that some classes of traders will be issued non-convertible debentures at a reduction to the provide value. It is a good concept since related reductions provided in preliminary public choices of fairness shares have lifted retail subscriptions within the fairness points. Nonetheless, the low cost must be provided to all retail traders subscribing lower than ₹2 lakh, according to guidelines for fairness IPOs, with out limiting the low cost to few classes similar to senior residents, defence personnel and so forth.
The opposite session paper, on the bottom guidelines for entities making excessive worth debt issuances, seeks to offer smaller firms reduction from tight compliance necessities. At the moment, firms with listed excellent non-convertible debt securities of ₹1,000 crore and above should comply with the company governance norms prescribed for fairness issuances of identical worth. Growing this restrict to ₹5,000 crore will ease the compliance burden on issuers of mounted earnings securities. With many smaller finance firms counting on the bond market, this leeway will result in extra issuances, boosting the provision of paper. The regulator should additionally encourage on-line bond platform suppliers. On-line platforms present a secondary marketplace for these securities, as they permit bonds of smaller denominations to be purchased and bought on their platforms. The bottomline is that retail traders are enthused by mounted earnings securities providing greater returns.
Revealed on November 20, 2025
