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The Securities and Exchange Board of India (SEBI) is intensifying its focus on the corporate bond market as a primary driver for capital formation and investment diversification. Speaking with reporters at the sidelines of the inaugural pan-India outreach program for Corporate Bonds, SEBI Chairman Tuhin Kanta Pandey outlined a multi-pronged strategy to enhance the bond ecosystem, emphasising improvements in primary issuances, secondary market liquidity, and investor awareness.
"The first thing is how to improve primary issuances, public issuances in bond. The second is how to improve secondary liquidity. And third is how to do more outreach so that the people understand," Pandey said. He noted that the corporate bond market has already shown significant growth, with the outstanding amount reaching Rs 58 lakh crore from Rs 17 lakh crore previously, reflecting a 12 per cent CAGR. He highlighted that while corporate bonds were once 40 per cent of bank credit to industries, they now account for 60 per cent, signalling a shift in how Indian services and industries seek funding. Addressing the current regulatory stance on other segments, Pandey clarified that SEBI is not contemplating immediate changes to the derivative markets. "I have said before that we, when we as a regulator, we are looking at derivative markets in a very methodical manner and based on data and others and at this moment we are not contemplating any measures," he stated. He added that the existing framework remains in place, and the regulator is maintaining a status quo while continuing to monitor data-driven developments. The Chairman also identified municipal bonds as a nascent but high-potential area for urban infrastructure financing. While 12 municipal bonds have been issued so far, Pandey described the current market as "next to negligible" compared to the requirements for urban development. To safeguard investors, SEBI has implemented a structure where revenues are retained in escrow accounts. "Municipalities with unstable finances would not be able to certainly issue these municipal bonds because they will not pass muster with us," he said, adding that the framework is developing fast as states begin to understand the market. To attract more foreign portfolio investors (FPIs), SEBI is focusing on reducing trade frictions and removing regulatory uncertainties. Pandey mentioned initiatives such as digital document submission, simplified block deal frameworks, and a consultation paper on netting to streamline operations. "Fundamental, when you have an overhang of a regulatory action, which is removed and trade frictions removed, so any capital formation is always accelerated," he said. Pandey emphasised the need for retail investors to diversify their portfolios according to their life cycle needs and risk profiles. With a unique investor base of 138 million, the regulator sees an opportunity for those hesitant about equity risks to enter the bond market. "We have to guide them on how to access the bond market and facilitate them and make them aware," Pandey noted. (ANI)
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