Why in News: SEBI Chairman Tuhin Kanta Pandey (who took charge on March 1, 2025) announced on May 26, 2026 that SEBI is developing bond ETFs, corporate bond index derivatives, and exploring Distributed Ledger Technology (DLT) tokenisation of corporate bonds to deepen India’s corporate debt market and enable retail participation. The derivatives launch is contingent on the RBI’s nod to the draft guidelines, while a tokenisation pilot has been proposed with a 6-9 month timeline.
About SEBI
The Securities and Exchange Board of India (SEBI) is the apex regulator of India’s securities and capital markets.
| Particulars | Details |
|---|---|
| Established | April 12, 1992 (statutory body via SEBI Act, 1992) |
| Origin | Operational since 1988 as a non-statutory body |
| Headquarters | Mumbai (Bandra Kurla Complex); 17 local offices |
| Current Chairman | Tuhin Kanta Pandey (took charge March 1, 2025) |
| Forward Markets Commission merger | September 28, 2015 |
Statutory framework
- SEBI Act, 1992 — primary statute
- Securities Contracts (Regulation) Act, 1956 (SC®A)
- Depositories Act, 1996
India’s Corporate Bond Market — Context
| Indicator | Value |
|---|---|
| Outstanding corporate bonds (FY26) | ~₹50 lakh crore |
| Corporate bond market as % of GDP (India) | ~18% |
| United States | ~120% of GDP |
| South Korea | ~80% of GDP |
| Annual issuance (India) | ~₹10 lakh crore |
| Sovereign bond market (India) | ~75% of GDP |
India’s corporate bond market is structurally shallow compared to advanced economies and even regional peers.
Existing SEBI Initiatives — Corporate Bond Market
Bharat Bond ETF
- First Indian bond ETF; launched December 2019
- Managed by Edelweiss Mutual Fund
- Composed of AAA-rated PSU bonds
Recent measures
- Minimum ticket size for privately placed bonds reduced to ₹10,000 (from ₹1 lakh earlier, October 2024)
- Online Bond Platform Providers (OBPP) regulated since 2022 — IndiaBonds, Bondskart, GoldenPi
- Request for Quote (RFQ) platform on BSE/NSE
New Initiatives Announced May 26, 2026
Bond ETFs (expanded)
Beyond the PSU-only Bharat Bond model — to include corporate AAA, AA, and infrastructure bonds, enabling broader retail diversification.
Corporate Bond Index Derivatives
- Derivative instruments where the underlying is a credit index (basket of corporate bond yields/spreads)
- Enables institutions to hedge credit risk — first-of-its-kind in India
- International parallels: CDX (North America) and iTraxx (Europe)
DLT Tokenisation of Corporate Bonds
- Permissioned blockchain — not public crypto
- Each bond unit represented as a digital token
- 6-9 month pilot proposed
Benefits
- Faster settlement (T+0 vs T+1)
- Fractional ownership
- Lower custody and servicing costs
Pilot precedents
- Bank of England DLT initiative (2025)
- MAS Project Guardian — Singapore (since 2022)
About Bond ETFs
- Exchange-traded baskets of bonds; tradable like stocks
- Provide diversification + liquidity for retail investors
- First international bond ETF: iShares Aggregate Bond ETF (AGG), launched 2003
Why Deepening the Corporate Bond Market Matters
- Infrastructure financing — India requires ~USD 1.5 trillion by 2030
- Insurance and pension asset-liability matching
- Strengthens monetary transmission — RBI rate changes flow through bond markets
- Reduces banking-sector concentration risk — post IL&FS (2018), DHFL (2019), Yes Bank (2020), Reliance Capital (2021)
Committee Recommendations (Background)
| Committee | Year | Recommendation |
|---|---|---|
| Tarun Ramadorai Committee | 2024 | Flagged retail under-participation as a structural failure |
| HR Khan Committee | 2016 | Recommended FII access reforms |
| Vijay Mathur Committee | 2018 | Corporate bond market reforms |
SEBI Regulatory Architecture (Recent)
- SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015
- Issue and Listing of Non-Convertible Securities Regulations, 2021
- Online Bond Platform Provider Regulations, 2022
- SEBI (Mutual Funds) Regulations, 1996
Investor Protection Considerations
- Credit rating ecosystem credibility — repeatedly tested by IL&FS (2018), DHFL (2019), Yes Bank (2020), Reliance Capital (2021)
- 7 active credit rating agencies accredited by SEBI: CRISIL, ICRA, India Ratings, CARE, Brickwork, Acuité, Infomerics
- Need for a risk-based suitability framework before retail roll-out
RBI-SEBI Joint Working Group
Established for a unified Indian bond market — covers:
- Cross-listing of debt instruments
- FPI access norms
- Settlement harmonisation between G-sec and corporate bond segments
Way Forward
- Align tax treatment of debt instruments (debt fund LTCG removed in 2023 — restoration under debate)
- Deepen FII participation (currently <2% of corporate bond holdings)
- Strengthen bankruptcy resolution under IBC — FY25 saw 75% recovery timelines stretching
- Move towards a single bond market regulator vision
UPSC Relevance
GS Paper 3 — Indian Economy: Mobilization of resources, capital markets, financial regulators, banking sector, infrastructure financing.
Prelims focus: SEBI structure and statutes, Bharat Bond ETF, OBPP, credit rating agencies, DLT/tokenisation basics, CDX/iTraxx benchmarks.
Mains focus: Why is India’s corporate bond market shallow? How can derivatives and tokenisation deepen retail participation while safeguarding investor protection?
Facts Corner
- SEBI Chairman: Tuhin Kanta Pandey (took charge March 1, 2025)
- SEBI Act: 1992
- SEBI established: April 12, 1992 (statutory); operational since 1988 as a non-statutory body
- SC®A: 1956; Depositories Act: 1996
- FMC merged with SEBI: September 28, 2015
- Bharat Bond ETF: launched December 2019 by Edelweiss Mutual Fund; AAA PSU bonds
- Privately placed bond minimum ticket: ₹10,000 (since October 2024)
- India corporate bond market: ~18% of GDP
- India infrastructure financing need: ~USD 1.5 trillion by 2030
- Active credit rating agencies: 7 (CRISIL, ICRA, India Ratings, CARE, Brickwork, Acuité, Infomerics)
- Online Bond Platform Provider Regulations: 2022
- DLT pilot timeline: 6-9 months (proposed May 2026)
- Tarun Ramadorai Committee: 2024
- First international bond ETF: iShares AGG (2003)
Source: SEBI Push for Bond ETFs and Corporate Bond Index Derivatives — Ujiyari.com | Free UPSC & State PCS Current Affairs
