SEBI To Place ‘Big Focus’ on Strengthening Corporate Bond Market: Chairman

Sebi will prioritise the development of the corporate bond market this year, with plans to introduce credit bond indices and related derivatives in coordination with the RBI, Chairman Tuhin Kanta Pandey said as the regulator seeks to deepen liquidity and broaden investor participation in the segment.

Having completed one year at the helm of the regulator on March 1, Pandey said he would place a "very, very big focus" on strengthening the corporate bond market in his second year.

He outlined plans to deepen secondary market liquidity, expand issuer participation and widen investor access.

In an interview with PTI, Pandey said limited retail awareness and thin secondary trading remain key challenges, with a large portion of corporate bonds being held to maturity.

"There is very little knowledge about the bond market at the level of retail," he said, adding that improving trading activity beyond primary issuances is a priority.

The regulator has initiated several reforms, including introducing the Request for Proposal (RFP) mechanism in the primary market and the Request for Quote (RFQ) framework for online bond platform providers to enhance transparency and price discovery.

Sebi is also working closely with the Reserve Bank of India (RBI) to develop credit bond indices and related derivatives.

"Now we are going with RBI. We are working together to credit bond indexes and the derivatives around it. This will also deepen the market. So the bond market has a big future," he said.

At present, the country's corporate bond market has about Rs 58 trillion in outstanding issuances, but participation remains limited, with only around 700 issuers tapping the bond market out of more than 5,900 listed companies.

Pandey said broader issuer participation, repeat issuances across ratings and a diversified risk-return matrix are essential to building a robust market catering to varied investor appetites.

He noted that developing the market would require parallel efforts on issuer education and investor outreach.

While institutional investors such as pension funds, insurance companies and other large entities dominate the segment, Sebi aims to gradually increase retail participation both directly and through mutual funds, positioning bonds as a viable long-term fixed-income investment option.

Pandey added that Sebi's initiatives over the past year have been guided by four principles -- trust, transparency, teamwork and technology --with reforms aimed at ease of doing business, investor protection and awareness, regulatory improvements, market development, and the introduction of new products and systems, including in the equity derivatives space.