SEBI Chief Highlights Risks In Corporate Bonds Amid Market Reforms Push
SEBI chief warns investors about corporate bond risks.
Securities and Exchange Board of India (SEBI) is preparing a pilot framework for tokenisation of corporate bonds as part of a broader set of reforms aimed at deepening India’s debt markets, even as the regulator cautioned investors that corporate bonds should not be viewed as risk-free instruments. Speaking at CareEdge Ratings’ Debt Market Summit, SEBI Chair Tuhin Kanta Pandey said the regulator is evaluating new market structures to improve liquidity, expand participation and strengthen investor confidence in the corporate bond ecosystem.
He emphasised that building a deeper and more trusted debt market remains a shared responsibility among regulators, issuers and market participants. India’s corporate bond market has expanded significantly in recent years, with outstanding issuances rising from about Rs 17.5 lakh crore to nearly Rs 59 lakh crore. In FY26 alone, companies raised around Rs 9.1 trillion through debt instruments, nearly double the amount mobilised via equity markets.
Despite this growth, SEBI noted that structural challenges continue to limit the market’s full potential. One of the key concerns highlighted by the regulator is weak liquidity. SEBI said bonds in India often trade infrequently, making exits difficult for investors and discouraging wider participation. The market also remains concentrated among a limited number of issuers, ratings and sectors, which restricts diversification opportunities. Retail participation is particularly low, with household exposure to bonds estimated at under 1 percent.
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To address these gaps, SEBI has already implemented measures such as the Request for Quote (RFQ) platform, which has helped improve secondary market activity. Bond trading volumes have increased from 1.2 million transactions in FY25 to 2.8 million in FY26. The regulator is now working with the Reserve Bank of India and other stakeholders to further strengthen market-making mechanisms and improve liquidity in the secondary segment.
SEBI is also considering several additional reforms, including a separate regulatory framework for debt brokers and a review of compliance norms for debt-only listed companies. The regulator is exploring issuer outreach programmes to encourage more firms to tap bond markets. Additionally, it is reviewing municipal bond frameworks to expand retail participation. The proposed tokenisation pilot, if implemented, could allow bonds to be represented digitally on blockchain-based systems, potentially improving settlement efficiency, accessibility and enabling fractional ownership for investors.
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