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DEEPENING THE
CORPORATE BOND
MARKET IN INDIA
REPORT ON

DECEMBER 2025 CORPORATE BOND
MARKET ivCORPORATE BOND MARKETCORPORATE BOND MARKET vCORPORATE BOND MARKETCORPORATE BOND MARKET viCORPORATE BOND MARKETCORPORATE BOND MARKET viiCORPORATE BOND MARKETCORPORATE BOND MARKET viiiCORPORATE BOND MARKETCORPORATE BOND MARKET ixCORPORATE BOND MARKETCORPORATE BOND MARKET xCORPORATE BOND MARKETCORPORATE BOND MARKET
Executive Summary
India’s ambition to become a higher-income country by 2047, Viksit Bharat, requires
a financial system that can mobilise long-term and low-cost capital efficiently to
sustain high investment and inclusive growth. In this context, a deep and vibrant
corporate bond market is indispensable to complement the banking system, reduce
systemic concentration risks, and provide a stable source of long-term financing
for infrastructure, industry, climate actions and emerging sectors. A well-developed
corporate bond market can play a pivotal role in achieving a balanced, resilient
financial architecture by expanding funding avenues, lowering borrowing costs,
and strengthening the transmission of monetary policy. This report presents a
comprehensive assessment of India’s corporate bond market, its evolution, present
structure, challenges, and policy measures, while benchmarking its performance
against global peers to identify pathways for further deepening and diversification.
It seeks to establish how a well-functioning corporate bond market can serve as a
key lever for financing India’s development ambitions and enhancing the resilience
of its financial ecosystem.
Over the past decade, India’s corporate bond market has expanded significantly,
with outstanding issuances rising from ₹17.5 trillion in FY2015 to ₹53.6 trillion in
FY2025, recording an annual growth rate of nearly 12 per cent. The market now
accounts for around 15–16 per cent of GDP, a considerable improvement, though
still well below the levels seen in countries like South Korea, Malaysia, or China.
Encouragingly, corporate bond fundraising is increasingly on par with bank credit,
underscoring growing investor confidence and the gradual shift toward market-
based financing. However, the bond market remains concentrated among top-rated
issuers, with private placements dominating issuance and limited participation from
MSMEs, retail investors, and foreign portfolio investors. This structural imbalance
constrains access to affordable capital for smaller firms and reduces overall market
liquidity.
A well-developed corporate bond market channels institutional and household
savings into productive sectors, supports efficient price discovery through a robust
yield curve, and facilitates the development of risk management instruments such
as credit derivatives and securitisation. Yet, several challenges continue to constrain
its growth. Regulatory overlaps between multiple authorities, extensive disclosure
requirements, and procedural delays discourage broader participation. The secondary
market remains shallow, with limited liquidity and price transparency. Institutional
investors, such as insurance companies and pension funds, are constrained by
investment norms that limit exposure to lower-rated securities. In addition, weak
debt recovery mechanisms, high transaction costs, and tax asymmetries reduce
investor appetite and restrict the flow of long-term capital. These structural frictions
collectively impede the corporate bond market from realising its full potential as an
engine of capital formation and financial inclusion. xiCORPORATE BOND MARKETCORPORATE BOND MARKET
Cross-country analysis in this report reveals that economies with vibrant corporate
bond markets, such as the United States, Singapore, South Korea, and some
developing countries, such as Thailand, have successfully combined coherent
regulation, strong market infrastructure, and deep secondary markets, and
targeted fiscal incentives to build depth and diversity. These markets demonstrate
how streamlined disclosure systems, efficient credit enhancement mechanisms,
and active market-making can foster liquidity, attract a broad investor base, and
promote financing.
India’s policy and regulatory authorities have already made significant strides in
this direction. SEBI has introduced electronic trading through the Request for
Quote (RFQ) platform, facilitated retail access through online bond platforms,
strengthened governance standards for credit rating agencies and debenture
trustees, and simplified issuance norms. The RBI has enhanced settlement
architecture, introduced tri-party repos and credit default swaps, and supported
the development of repo and clearing mechanisms. Additionally, the Government
has promoted Infrastructure Investment Trusts (InvITs), Real Estate Investment
Trusts (REITs), and green finance initiatives to encourage long-term investment and
deepen capital markets. Collectively, these reforms have laid a strong foundation
for a more transparent, accessible, and technology-driven bond market ecosystem.
To unlock the full potential of the bond market, the report underscores the
importance of a sequenced, sustained reform strategy implemented through a
phased approach. In the initial phase, efforts focus on streamlining regulations and
procedures, enhancing coordination among regulators, and improving legal clarity.
Simultaneously, strengthening market infrastructure, through digital access, reliable
credit ratings, and robust trading platforms, will lay the foundation for broader
adoption and improved liquidity. Early measures will also target the issuer segment
by simplifying market access and building momentum through quick wins, while
fostering basic innovation in instruments and expanding investor outreach. These
short-term actions aim to reduce friction, deepen participation, and build confidence
across the ecosystem.
Over the medium to long term, the focus shifts to deeper structural reforms and
institutional capacity-building. Regulatory frameworks will evolve to support a unified
architecture, more effective resolution mechanisms, and a conducive environment
for innovation. Market infrastructure will be upgraded for scale and resilience,
enabling digital transformation across issuance, trading, and settlement. The issuer
base will be broadened through the promotion of new asset classes, while product
innovation will be institutionalised to introduce sustainable, inclusive, and long-
term investment options. Investor participation will be expanded through targeted
incentives, greater integration of foreign investors, and improved transparency.
Complementing these efforts, technological advancements will enhance data-
driven decision-making and market intelligence, helping create a more efficient,
transparent, and inclusive bond market. xiiCORPORATE BOND MARKETCORPORATE BOND MARKET
The recommendations presented in this report are not merely incremental
improvements but part of a comprehensive strategy to make India’s corporate bond
market globally competitive, resilient, and inclusive. Implemented in a phased and
coordinated manner, these reforms would not only address short-term frictions but
also build the institutional depth required for sustainable long-term development.
With continued policy focus, technological innovation, and harmonised regulation,
India’s corporate bond market has the potential to exceed ₹100–120 trillion by 2030,
evolving into a key pillar of India’s financial system, one that channels domestic and
global capital towards productive sectors and underpins the country’s long-term
growth trajectory toward Viksit Bharat @ 2047. 1CORPORATE BOND MARKETCORPORATE BOND MARKET
Table of Contents
1. Introduction: ��6
1.1 Corporate Bond Market in India: An Overview ��7
2. Benefits of a developed Corporate Bond Market in India��10
3. Credit market landscape in India and the challenges facing the Indian
corporate bond market��14
4. Cross-Country Analysis: Best Practices�� 28
4.1 Cross-Country Comparison of Corporate Bond Markets on various
parameters��29
4.2 Cross-Country Comparison of Corporate Bond Markets: Best Practices��31
4.3 Benchmarking India’s Corporate Bond Market vis-à-vis other economies��40
5. Reforms and Policies undertaken towards strengthening India’s Corporate
Bond Market��46
5.1 Reforms by the Securities Exchange Board of India (SEBI) to develop the
Corporate Bond Market��47
5.2 Measures by the Reserve Bank of India (RBI) to develop the Corporate
Bond Market��56
5.3 Some specific measures by the Ministry of Finance & Government of India��60
6. Deepening the Corporate Bond Market: Way Forward��64
6.1 Enhance the Legal and Regulatory Framework��65
6.2 Strengthen the Market Infrastructure and Institutional Architecture��70
6.3 Encourage the Issuer segment of the Market��74
6.4 Fos ter Innovation in Instruments and Products��78
6.5 Encouraging Broader Investor Participation��83
6.6 Improving the Market Efficiency and Transparency��87
6.7 Technological Advancements can help increase Market breadth��90
7. Conclusion��92
8. Appendix��94 2CORPORATE BOND MARKETCORPORATE BOND MARKET
List of Abbreviations
Abbreviation Full Form
ADBAsian Development Bank
AIFAlternative Investment Fund
AIIBAsian Infrastructure Investment Bank
AMCAsset Management Company
AMFIAssociation of Mutual Funds in India
ANBCAdjusted Net Bank Credit
ARCAMC Repo Clearing Corporation Limited
ARCLAMC Repo Clearing Limited
ASEANAssociation of Southeast Asian Nations
ASBAApplication Supported by Blocked Amount
ASSOCHAMAssociated Chambers of Commerce and Industry of India
AUMAssets Under Management
BABsBuild America Bonds
BBBBetter Business Bureau / Bond Credit Rating Category
BISBank for International Settlements
BIRBond Investor Registration
BNDESBrazilian Development Bank
BOTBank of Thailand
BOJBank of Japan
BSEBombay Stock Exchange
CAGRCompound Annual Growth Rate
CBIRCChina Banking and Insurance Regulatory Commission
CBRICSCorporate Bond Reporting and Integrated Clearing System
CBMFICorporate Bond Market Functioning Index
CCILClearing Corporation of India Limited
CCRCentralised Clearing Repository
CDSCredit Default Swap
CEICCEIC Data Company (Global Economic Database)
CFTCCommodity Futures Trading Commission
CGTCapital Gains Tax
CMNNational Monetary Council (Brazil)
CMUCapital Markets Union
CoCCommittee of Creditors
CRACredit Rating Agency
CREBsClean Renewable Energy Bonds
CRISILCredit Rating Information Services of India Limited
CSRCChina Securities Regulatory Commission
CVMComissão de Valores Mobiliários (Brazilian Securities Commission)
DLTDistributed Ledger Technology
DRTDebt Recovery Tribunal
DVPDelivery-versus-Payment
EBPElectronic Book Provider
EEAEuropean Economic Area
ELSSEquity Linked Savings Scheme
EMIREuropean Market Infrastructure Regulation 3CORPORATE BOND MARKETCORPORATE BOND MARKET
Abbreviation Full Form
EPFOEmployees’ Provident Fund Organisation
ETFExchange-Traded Fund
EUEuropean Union
FDIForeign Direct Investment
FIIForeign Institutional Investor
FINRAFinancial Industry Regulatory Authority
FIMMDAFixed Income Money Market and Derivatives Association of India
FIsFinancial Institutions
FPIForeign Portfolio Investor
FRAFinancial Restructuring Authority
FYFinancial Year
G20Group of Twenty
GDPGross Domestic Product
GIFT CityGujarat International Finance Tec-City
GoIGovernment of India
G-SecGovernment Security
HNIsHigh Net-worth Individuals
HSBCHongkong and Shanghai Banking Corporation
IBCInsolvency and Bankruptcy Code
ICRAInvestment Information and Credit Rating Agency
IFSCInternational Financial Services Centre
IGInvestment Grade
IMFInternational Monetary Fund
InvITsInfrastructure Investment Trusts
IPOInitial Public Offering
IRDAIInsurance Regulatory and Development Authority of India
ISINInternational Securities Identification Number
JBICJapan Bank for International Cooperation
JOBS ActJumpstart Our Business Startups Act
KDBKorea Development Bank
KIDKey Information Document
KODITKorea Credit Guarantee Fund
KRXKorea Exchange
K-Taxonomy Korean Taxonomy for Sustainable Investments
KYCKnow Your Customer
LCLarge Corporate
LPCCLimited Purpose Clearing Corporation
LTCGLong-Term Capital Gains
MCAMinistry of Corporate Affairs
MiFIDMarkets in Financial Instruments Directive
MiFID IIMarkets in Financial Instruments Directive II
MiFIRMarkets in Financial Instruments Regulation
MOEMinistry of Environment (South Korea)
MoFMinistry of Finance
MSMEMicro, Small and Medium Enterprises
NAFMIINational Association of Financial Market Institutional Investors (China) 4CORPORATE BOND MARKETCORPORATE BOND MARKET
Abbreviation Full Form
NBFINon-Bank Financial Institution
NCLTNational Company Law Tribunal
NDRCNational Development and Reform Commission (China)
NHAINational Highways Authority of India
NIPNational Infrastructure Pipeline
NPSNational Pension System
NSENational Stock Exchange
NSDLNational Securities Depository Limited
OICOffice of Insurance Commission (Thailand)
OTCOver-the-Counter
PANPermanent Account Number
PCEPartial Credit Enhancement
PDCFPrimary Dealer Credit Facility
PFRDAPension Fund Regulatory and Development Authority
PIPEPrivate Investment in Public Equity
PMJDYPradhan Mantri Jan Dhan Yojana
PMLAPrevention of Money Laundering Act
PRIIPsPackaged Retail and Insurance-based Investment Products
PSBPublic Sector Bank
PSUPublic Sector Undertaking
QECBsQualified Energy Conservation Bonds
QIBQualified Institutional Buyer
QIPQualified Institutional Placement
RBIReserve Bank of India
REITsReal Estate Investment Trusts
RFQRequest for Quote
RMRinggit Malaysia (Currency)
SBLSecurities Borrowing and Lending
SEBISecurities and Exchange Board of India
SECSecurities and Exchange Commission (United States)
SGXSingapore Exchange
SGRBSovereign Green Bond
SMESmall and Medium Enterprises
SMCCFSecondary Market Corporate Credit Facility
SPVSpecial Purpose Vehicle
STCGShort-Term Capital Gains
SUSEPSuperintendence of Private Insurance (Brazil)
TRACETrade Reporting and Compliance Engine
TDSTax Deducted at Source
UBOUltimate Beneficial Owner
USDUnited States Dollar
US/UKUnited States / United Kingdom
VATValue Added Tax
WHTWithholding Tax
WPIWholesale Price Index 5CORPORATE BOND MARKETCORPORATE BOND MARKET 6CORPORATE BOND MARKETCORPORATE BOND MARKET
Section 1
Introduction 7CORPORATE BOND MARKETCORPORATE BOND MARKET
1. Introduction
This section provides an overview of the corporate bond market in India —its origins,
structure, and performance over time. The objective is to present the current landscape of
the corporate debt market and its significance for the economy.
1.1 Corporate Bond Market in India: An Overview
India’s march towards achieving the vision of “Viksit Bharat by 2047”, a US$30
trillion economy with a US$18,000 per capita income, taking India to higher-income
countries, requires a robust and diversified financial ecosystem capable of mobilising
long-term capital at scale. As of March 2025, India’s equity market capitalisation
stood at approximately USD 4.8 trillion (CEIC, 2025), while the outstanding size
of the corporate bond market stood at ~USD 642 billion (RBI, 2025), underscoring
growing investor confidence and deepening capital markets. However, equity
financing alone cannot meet the breadth and complexity of the nation’s investment
demands, particularly in strategic sectors such as infrastructure, MSMEs, and
emerging technologies. To sustain structural transformation and inclusive growth,
it is imperative to strengthen low-cost debt financing channels that offer long-
term, stable, and affordable capital. Instruments such as corporate bonds, municipal
bonds, MSME credit platforms, and funding mechanisms facilitated by development
finance institutions present scalable alternatives to traditional bank credit.
Crucially, closing India’s long-term credit gap, especially in infrastructure financing
and MSME development is a priority. Addressing this challenge requires concerted
efforts in policy reform, institutional innovation, and market deepening to facilitate
efficient capital flows and unlock private-sector participation. A balanced and
resilient financial architecture, anchored in both equity and debt markets, is essential
for India to accelerate its developmental trajectory and unlock the full potential of
its demographic and economic dividend.
Over the last decade, India’s debt market
has gradually evolved from a narrow,
bank-dominated financing system into a
more diversified, though still developing,
source of funding for businesses. The
net outstanding under corporate bonds
increased from ₹17.5 trillion in FY 2014-15
to around ₹ 53.6 trillion in FY 2024- 2025
(RBI, 2025), i.e., a CAGR of ~12%, with
the highest-ever fresh issuances of ₹9.9
trillion during 2024-25. Over the last 10
years, the representation of corporate
bonds in the overall outstanding of
bonds has been consistent between 21%
to 25% (Fig. 1).
Source: SEBI 8CORPORATE BOND MARKETCORPORATE BOND MARKET
Fund-raising through corporate bonds has been an increasingly adopted route for
Indian companies, with cumulative issuances of ₹22.2 lakh crore during FY22-FY24.

This is comparable to the ₹25.4 lakh crore raised via bank credit during the same
period, showcasing the growing preference for debt capital markets. Credit Rating
Information Services of India Limited (CRISIL) forecasts substantial growth in the
corporate bond market, with outstanding size expected to more than double from
around ₹54 trillion currently to ₹100-120 trillion by fiscal 2030 (NSE & ASSOCHAM
2024).
It’s interesting to note, however, that over the past decade, India has shifted from a
shortage of equity risk capital to a situation in which equity is more accessible, while
debt-based credit, particularly for lower-rated borrowers, remains constrained. This
reflects more profound shifts in market structure and investor preferences.
Between 2014-2016, the debt-to-equity
ratio
1
averaged above 6, indicating high
reliance on debt markets. The ratio
declined sharply from 8.7 in 2016 to
around 2.3 by 2019, while equity’s share
in total capital mobilisation peaked at
over 30% in 2018–19. Post-2020, while
equity issuance remained strong, credit
availability in the debt segment picked
up only gradually, as the debt-equity
ratio rose to 4.8 in 2023 before falling
again in 2024 (Sengupta and Vardhan,
2022), suggesting a growing reliance
on equity financing.
This shift may have been supported by institutional reforms such as the Insolvency
and Bankruptcy Code (IBC), corporate tax cuts, and streamlined Initial Public Offering
(IPO) and Qualified Institutional Placement (QIP) norms. Measures like easing IPO
rules, introducing Application Supported by Blocked Amount (ASBA), Small and
Medium Enterprises (SME) platforms, and enabling Real Estate Investment Trusts
(REITs)/ Infrastructure Investment Trusts (InvITs) further deepened equity markets.
India has made good progress in debt mutual funds and has established a strong
foundation in bond Exchange Traded Funds (ETFs). The Nifty BHARAT Bond Index
series (launched in Dec 2019), followed by the BHARAT Bond ETFs, led to significant
growth in debt ETFs. From an AUM share of 2% in Mar 2019, in the overall ETF space,
debt ETFs’ share rose to 14% by Apr 2024, with an AUM of ₹60,775 crores. Equity
and commodity ETFs accounted for the remaining share. As per the Association of
Mutual Funds in India (AMFI), the contribution of debt mutual funds to total AUM
(as on 31 Mar 2025) stands at 23%, compared to equity mutual funds at 45%.
1 Funds mobilized via Debt Instruments/ Funds mobilized via Equity InstrumentsSource: CEIC 9CORPORATE BOND MARKETCORPORATE BOND MARKET
Source: AMFI
The primary objective of this report is to deliver the most current and integrated
insights about India’s corporate bond market. While existing literature offers
substantial insights, it often remains fragmented and narrowly focused. By integrating
diverse facets of the bond market, this report constructs a unified narrative that
sheds light on often-overlooked dimensions through nuanced analysis.
The report explores the benefits of a deep and liquid corporate bond market, while
identifying structural and regulatory considerations that may limit its expansion.
Distinguishing itself from prior studies, this report incorporates a rigorous cross-
country comparative framework to benchmark India’s progress against global best
practices. Examining successful models from mature and emerging markets offers
valuable insights into the institutional, regulatory, and market design features that
have enabled other economies to build resilient corporate bond markets. The report
also discusses key reforms and policy interventions introduced by the SEBI and
the RBI and evaluates their effectiveness. A phased set of recommendations is
then proposed to guide future development, covering key dimensions of the bond
market ecosystem.
By adopting a forward-looking and reform-oriented lens, the report aims to chart
a strategic roadmap for transforming India’s corporate bond market into a robust,
inclusive, and competitive financing channel capable of supporting the country’s
long-term economic ambitions of “Viksit Bharat @ 2047”. 10CORPORATE BOND MARKETCORPORATE BOND MARKET
Section 2
Benefits of a Developed
Corporate Bond Market in India 11CORPORATE BOND MARKETCORPORATE BOND MARKET
2. Benefits of a Developed Corporate Bond Market in India
This section outlines the benefits of having a well-developed corporate bond market in
an economy. It highlights how a vibrant bond market boosts capital formation, offers
long-term financing, and reduces reliance on bank lending, and supports infrastructure
development and economic growth.
2.1 Diversified Corporate Funding Beyond Banks
India’s corporate bond market, at around ~16% of GDP, remains modest compared to
developed economies (detailed analysis is provided in the “Cross-Country Analysis”
section), indicating untapped potential in mobilising long-term capital. As the
country scales up infrastructure and industrial capacity, the demand for diversified
fund sources, particularly long-term capital, will rise sharply. A well-developed bond
market provides firms with an alternative source of funding, reducing dependence
on banks and broadening access to investors.
Currently, Indian corporates remain
heavily reliant on bank credit, which
increases systemic risk and limits
access for underserved sectors (Fig. 4).
For many SMEs, barriers such as high
issuance costs and credit concerns still
restrict capital market participation.
A well-developed bond market allows
banks to focus more on priority sectors,
fresh projects and improve credit flow
to MSMEs. By offering a market-based
channel for long-term finance, bonds
foster competition, improve capital
efficiency, and support financial stability.
A deeper bond market also reduces the need for frequent government recapitalisation
of stressed banks, easing fiscal pressures and aligning with national goals to mobilise
private capital for sustained economic growth. It can also contribute significantly
to greater financial stability, reducing credit concentration risk and mitigating the
buildup of non-performing assets (NPAs). This shift enables more efficient risk
allocation across the financial system.
2.2 Channelling Institutional and Household Savings into Markets
A mature corporate bond market would expand the range of financial instruments,
offering tailored solutions for diverse issuer and investor needs. For institutional
investors such as insurance firms and pension funds, it enables longer-term
bonds aligned with asset–liability management. For retail investors, it provides an
alternative to bank deposits with potentially higher returns, channelling household Source: SEBI and Economic Survey 12CORPORATE BOND MARKETCORPORATE BOND MARKET
savings into productive use. India has made good progress in debt mutual funds
and has established a strong foundation in bond ETFs. Bond ETFs, like BHARAT
Bond ETFs, provide efficient access to AAA-rated public sector bonds with low
management fees and predictable returns. According to the IMF’s G20 Diagnostic
Framework, a deep bond market diversifies the investor base and reduces liquidity
and credit premia across fixed income assets.
2.3 Lowering Borrowing Costs through Efficient Markets
In India, while bank loans offer flexibility, they remain costlier and slower to transmit
monetary policy changes. Since February 2025, RBI’s ~100 bps rate cuts have
lowered corporate bond yields, especially for short- to medium-term maturities,
boosting market activity.
2
Between February and July 2025, banks reduced their
lending rates by only 53 bps.
3
AAA-rated one-year bonds yielded ~6.8%, while AA+
and AA bonds yielded ~7.25% and ~7.52%, respectively, in early Jun 2025, exhibiting
a more immediate response to the RBI’s rate cuts.
4
Yet, non-financial corporates
tap only ~25% of domestic bond financing, despite 85–90% having AA or higher
ratings. Therefore, non-financial companies must diversify their borrowing sources,
especially when the corporate bond market offers softer rates than bank lending
rates for similarly rated credits (Crisil Ratings, 2025). By broadening funding
channels, improving liquidity, and fostering competition among issuers and investors,
such markets tend to exert downward pressure on yields. Research (BIS, 2024)
also indicates that developed corporate bond markets exhibit greater liquidity
and resilience. As corporates gain greater access to alternative sources of capital,
banks and other lenders are incentivised to offer competitive rates, further lowering
borrowing costs for businesses.
2.4 Deeper Financial Markets for Efficient Pricing and Risk Management
A well-functioning corporate bond market enhances overall financial market depth and
efficiency by complementing the government securities (G-Sec) market in developing
a robust yield curve. This yield curve acts as a benchmark for pricing corporate debt,
enabling more accurate risk assessment and efficient capital allocation. Deeper bond
markets also support the growth of credit derivatives, bond insurance, and securitisation,
critical tools for risk transfer and financial sector resilience. Instruments like Credit Default
Swaps (CDS), particularly for lower-rated bonds, rely on substantial bond market depth
and transparent pricing to function effectively.
Overall, a mature corporate bond market creates a virtuous cycle, strengthening
banks, enriching capital markets, and spurring innovation. These interconnected
gains contribute to a more resilient and efficient financial ecosystem, supporting
broader economic ambitions.
2 “Indian Companies Rush to Sell Short-Term Debt as RBI Monetary Boost Lowe rs Rates.” Reuters, May 28, 2025.
3 Arora, Puneet Kumar, and Jaydeep Mukherjee. 2025. “Repo Rate Fell, but Loans Stayed Costly: How RBI Rate Cuts Have Been
Lost in Transmission So Far.” LiveMint, September 28.
4 Anshika Kayastha and Shayan Ghosh, “What Drives the New Corporate Love for Bond Market,” LiveMint, June 5, 2025 13CORPORATE BOND MARKETCORPORATE BOND MARKET 14CORPORATE BOND MARKETCORPORATE BOND MARKET
Section 3
Credit Market Landscape in India
and the Challenges Facing the Indian
Corporate Bond Market 15CORPORATE BOND MARKETCORPORATE BOND MARKET
3. Credit Market Landscape in India and the Challenges Facing
the Indian Corporate Bond Market
This section focuses on the structural and operational challenges regulatory landscape,
resolution mechanisms, participation, and risk mitigation tools that constrain the growth
of the corporate bond segment. By identifying these barriers, the section sets the stage
for targeted reforms to build a deeper, more resilient, and inclusive corporate bond market
in India.
As per the World Bank (2024), the share of domestic credit, by scheduled Commercial
Banks, to the private sector in India is about 50% of GDP, which is modest compared
to countries like China (194%), Thailand (148%), and Vietnam (125%). Moreover, a
large part of the available credit is taken up by large corporates, having strong
financials, good collateral, and bankable projects. On the other hand, smaller
businesses, especially MSMEs, face a credit gap due to insufficient and unaffordable
credit availability (SIDBI, 2025). Total outstanding bank credit to the MSME sector
as of March end 2024 stood at ₹ 27.25 lakh crore, accounting for only 19.3% of the
total ANBC (Adjusted Net Bank Credit)
5
. Another factor influencing India’s credit
landscape is the relatively high interest rate environment. Elevated borrowing costs
can make long-term financing more expensive, particularly for infrastructure and
industrial projects, potentially affecting the attractiveness of bond markets for
issuers. While high interest rates do not inherently limit bond market development,
they may encourage a preference for shorter-tenor instruments or bank financing,
especially in the absence of a deep and liquid corporate bond market. As a result,
India’s corporate bond market remains relatively shallow, with limited access to
market-based finance for several sectors, including MSMEs and infrastructure.
Challenges facing the Indian corporate bond market: The “Economic Survey
2024-25” highlighted issues such as high entry costs, information asymmetry, and
the absence of a secondary market, all of which need to be addressed to deepen
the corporate bond market. These problems collectively stifle the growth of the
corporate bond market, limiting its potential as a robust financing avenue for Indian
corporations.
3.1 Limitations in Institutional Frameworks and Regulatory Mechanisms
3.1.1 Regulatory Overlapping and Fragmentation: India’s corporate bond market is
governed by multiple regulators, including SEBI, RBI, and the MCA, each overseeing
different aspects of issuance, trading, and compliance. While this structure ensures
that specialised areas receive focused attention, it can also create coordination
challenges for issuers and market participants. In some cases, overlapping compliance
requirements, such as similar disclosure and documentation obligations under SEBI,
RBI, and MCA, may increase procedural burdens and lengthen timelines. Additionally,
regulatory clarity around newer
instruments such as hybrid bonds and covered bonds is
5 ANBC is computed as Net Bank Credit (Total Bank Credit Bills Rediscounted with RBI and Other FIs) plus investments made
by banks in non-SLR bonds held in the HTM category, plus other eligible instruments as notified by the RBI from time to time. 16CORPORATE BOND MARKETCORPORATE BOND MARKET
still evolving, which may lead to uncertainty or delays in approvals. Varying rules for similar
instruments across different issuer types can also create inefficiencies, such as delayed
issuances, impacting the overall efficiency of the bond market. For instance, corporate
bonds issued by NBFCs are regulated by the RBI, while similar bonds by other corporates
fall under SEBI’s jurisdiction, leading to differing disclosure requirements and timelines.
3.1.2 Extensive Disclosure Requirements: Lower-rated issuers avoid bonds and prefer
bank loans, which, offer more flexible terms and lower disclosure burdens. India’s corporate
bond disclosure requirements are extensive, particularly for lower-rated or infrequent
issuers. In contrast, in the U.S., seasoned issuers can access the markets within 1–5 days
under SEC Rule 415, using mechanisms like automatic effectiveness, which accelerates
approval, and incorporation by reference, which allows them to reuse prior disclosures to
streamline the filing process. The UK offers similar efficiency through the FCA’s
6
simplified
disclosure and base prospectus regime for wholesale bonds.
This may have led to private placements dominating India’s corporate bond market, due
to their lower costs and simplified regulatory requirements. Private placements require
less stringent documentation than public offerings. In contrast, public bond issues require
extensive disclosure and go through a lengthy approval process, making them less
attractive due to high costs and regulatory complexity. The volume of private placements
has risen sharply, from ₹2.80 trillion in 2013-14 to ₹8.38 trillion in 2023-24, indicating
growing investor interest in bond-based financing (Fig 5A).
Source: SEBI
The surge points to the growing corporate sector, which is increasingly turning to
alternative funding sources beyond traditional banking channels, highlighting a more
diversified, market-driven approach to corporate finance. However, the public issues
of the corporate bonds have significantly dwindled, dropping from over 13% of overall
corporate bond issuance volume in 2013-2014 to a mere 2% in 2023-2024 (Fig. 5B).
The graphs below depict the resource mobilisation through Private Placement and Public
Issue, respectively (Fig. 6A and 6B). An obvious observation is the overall preference for
Private Placement among companies. In FY 24, the number of issues made to the public
by corporates was merely 45 in number, resulting in the mobilisation of Rs. 19 thousand
6 Financial Conduct Authority, CP25/2: Further Changes to the Public Offers and Admissions to Trading Regime and the UK List-
ing Rules (Consultation Paper, London: FCA, 31 January 2025) 17CORPORATE BOND MARKETCORPORATE BOND MARKET
crores compared to 1,347 total issues (approx. 42 times compared to public issues)
placed privately by corporates for an amount of Rs. 8 lakh crores (approx. 30 times
compared to public issues).
Fig 6: Resource Mobilization in Corporate Bond Market
Source: SEBI
3.1.3 Limited Investment Flexibility to Non-Bank Financial Institutions (NBFI):
While NBFIs have increased their investments in local currency corporate bonds,
the holdings of insurance companies and pension/provident funds remain well
below the investment limits set by regulators. This is primarily due to restrictions
that limit their ability to invest in bonds rated below AA, thereby constraining their
participation in the market for investment-grade bonds issued by companies rated
BBB-A.
Insurance companies, governed by IRDAI, must invest at least 75% in approved
instruments (AAA/AA-rated instruments, GoI Securities among others) and maintain
some minimum exposure in government securities, with a further restriction of not
investing more than 10% of an issuer’s net worth in a single non-equity instrument,
such as bonds issued by SPVs. This effectively excludes most infra SPVs, which are
typically structured with minimal equity and rated below AAA due to project risks.
Pension funds, regulated by PFRDA and EPFO, are permitted to invest in private
sector instruments only if they are high-rated (AA and above). At the same time,
they lack a risk-tier framework that distinguishes between stable infrastructure
assets and general corporate debt. These restrictions reduce the investor base
for such bonds, limiting market size and the availability of funds for private-sector
credit.
3.1.4 Weaknesses in the Credit Rating Agency (CRA) Framework: India’s credit
rating ecosystem, dominated by CRISIL, ICRA, and CARE, faces limitations such
as conflicts of interest due to the issuer-pays model, high entry barriers limiting 18CORPORATE BOND MARKETCORPORATE BOND MARKET
competition, and instances of rating shopping. The rating landscape is also skewed
by the pronounced preference among institutional investors for high-rated, low-
risk bonds. This risk aversion, as discussed earlier, is primarily shaped by regulatory
frameworks issued by bodies such as the RBI, IRDAI, and PFRDA.
In contrast, a different pattern is seen across several ASEAN peers, where market
structure, investor mandates, and marginal yield benefits disincentivise AAA ratings.
In Malaysia and Indonesia, most issuances cluster in the AA-A range as institutional
investors find little added value in AAA, while in Thailand, lenient rating standards
for A ratings and demand from retail and high-net-worth investors support a wider
spread provided by lower-rated papers, including BBB. These examples underscore
how regulatory thresholds, investor preferences, and rating agency practices
collectively shape rating distribution across markets
7
.
India has the highest share of AAA-
rated bonds (Fig. 7) compared to
its emerging market peers (Fig. 8),
including China (50%), Malaysia
(40%), Thailand (48.7%), and
Indonesia (49%), with top-rated
company bonds making up 70.9%
of the market. In fiscal year 2023,
‘AAA’ and ‘AA’ bonds dominated,
accounting for 94% of total corporate
bond issuances, while mid-rated
bonds (‘BBB’ and ‘A’ categories)
comprised only around 5%.
7 Refer Exhibit 1 under section 3 of “Appendix” to read more about the global scenario
Source: Acuite Ratings
Source: CRISIL 19CORPORATE BOND MARKETCORPORATE BOND MARKET
In 2024-25, AAA-rated firms dominated total issuances in the corporate bond
market, with firms rated below AA constituting 16% of the total issuances (RBI,
2025). This preference for higher-rated bonds highlights the limited demand for
mid-tier debt. US and EU bond markets are heavily concentrated in lower-rated
categories, with AAA issuances making up only 1% in the US and 2% in the EU, while
the bulk of their markets (over 89%) lie in the ‘A and below’ segment. (For further
insights, refer to Section 4)
3.2 Evolving Market Infrastructure and Low Trading Efficiency
3.2.1 Low Trading in Secondary Markets and Lower Liquidity: The Indian corporate
bond market is characterised by a persistent “buy-and-hold” investment strategy.
This behaviour, primarily driven by institutional investors, is rooted in regulatory
incentives and the desire for predictable long-term returns. Additional structural
issues include the lack of real-time pricing mechanisms and limited post-trade
transparency, both of which undermine investor confidence and reduce market
efficiency. High transaction costs, such as taxes and brokerage fees, add further
friction to trading and disincentivise broader participation. India’s Annual Bond
Turnover Ratio in secondary markets
8
of 0.3 is lower than that of regional peers
like Indonesia (1.17) and China (1.16), indicating a relatively illiquid secondary bond
market (Fig. 9). While secondary market trading (average daily volumes) has grown
significantly from ₹2,438 crore in FY14 to ₹5,722 crore in FY24, but has stagnated
between ₹5,400 crore and ₹6,000 crore since 2018
9
(NSE, 2024).
Source: Asianbondsonline
*Data for India is taken from SEBI and for all other countries, data is sourced from Asian Bonds Online. Data for
China pertains to year 2022 and data for other countries pertains to year 2023.
Annual Bond Turnover Ratio : Total value of bonds traded during the year by the average amount of bonds
outstanding at year-end.
8 The Annual Bond Turnover Ratio in the secondary market is an indicator of bond market liquidity. It is calculated by dividing
the total value of bonds traded during the year by the average amount of bonds outstanding at year-end.
9 The average daily trading volume is derived by dividing the total annual trading volume by the number of active trading days
in the year (Fig 10) 20CORPORATE BOND MARKETCORPORATE BOND MARKET
Source: SEBI
3.2.2 Settlement Infrastructure needs further development: Delivery-versus-
Payment (DVP) clearing is available for exchange-traded corporate bonds and for
trades reported on platforms like Corporate Bond Reporting and Integrated Clearing
System (CBRICS), Request for Quote (RFQ), and Clearing Corporation of India Ltd.
(CCIL), through clearinghouses such as NSE Clearing Ltd. (NSCCL). However, many
over-the-counter (OTC) trades, which dominate the market, still rely on bilateral
settlement. In these cases, while bonds are held in dematerialised form, cash and
securities are settled separately, often on an inter-office basis. This exposes the
seller to payment risk. To boost market confidence and support broader investor
participation, India’s corporate bond market may require enhanced settlement
infrastructure.
3.2.3 Market Making is nascent
10
: Market-making in India remains in its early
stages. Despite various initiatives over the past decade, its implementation has
been challenging due to a shortage of competitive, capable, and well-capitalised
intermediaries willing to serve as market makers. Currently, banks and financial
institutions dominate the role of arrangers, but their limited appetite for market risk
has led only a few NBFCs and brokers to take on this function, with a focus on highly
rated corporate bonds, thereby minimising underwriting risk.
3.2.4 Need to strengthen the Benchmark Yield Curve across tenures: A well-
developed and liquid government securities yield curve is essential for pricing
corporate bonds, as it serves as the reference for determining credit spreads across
maturities. Liquidity in the G-sec market is not uniform across the curve but is
concentrated in a few maturity segments due to market participants’ “preferred
habitat” and “market segmentation” behaviour (BIS, 2025). Moreover, in India, the
bulk of the trading remains concentrated in securities with tenors between 7 and 10
years (RBI, 2020). A wider distribution of secondary market liquidity across tenors
could further increase the reliability of the sovereign yield curve as a benchmark for
risk-free rates and, consequently, improve the pricing of non-sovereign debt. Lower
10 Refer Exhibit 2 under Section 3 of the “Appendix” to read about Comparative Overview of Bond Market Makers Across Countries 21CORPORATE BOND MARKETCORPORATE BOND MARKET
Liquidity affects the assessment of fair credit risk premiums and pricing long-
duration instruments, particularly relevant for infrastructure and ESG-linked bonds.
FIMMDA’s SLV-based daily and fortnightly yield matrices use polling and traded
data across ratings and maturities. However, limited market depth, especially in the
15–30-year government bond segment, constrains their accuracy.
3.2.5 Fragmented Corporate Bond Data Infrastructure: India maintains multiple
corporate bond databases, managed by the RBI, SEBI, and stock exchanges, but
these systems are often siloed, inconsistent, and subject to reporting delays. The
lack of a unified, user-friendly platform makes it difficult for market participants
to access timely and reliable data. Additionally, delays in data publication force
market-makers to rely on outdated information, reducing liquidity and increasing
funding costs. Integrating these datasets into a centralised and regularly updated
portal would significantly improve market efficiency, transparency, price discovery,
risk assessment and funding decisions for both investors and issuers.
3.2.6 Underdeveloped Risk Mitigation Products: India’s corporate bond market
continues to face limitations in its risk management infrastructure, particularly in the
markets for interest rate futures, swaps, and credit derivatives. These instruments
are essential for hedging against interest rate volatility and credit risk, but remain
shallow and illiquid, limiting their use by banks and investors. While the RBI provided
the guidelines for Credit Default Swaps (CDS) for corporate bonds, adoption has
been slow due to participation restrictions, limited eligible instruments, and the
absence of a central clearing counterparty
11
. Currently, CDS contracts are permitted
only on single-name corporate bonds, and users must have an underlying exposure
to hedge. Retail users are restricted to exchange-traded CDS for hedging purposes,
and foreign portfolio investors (FPIs) are subject to a 5% cap on the outstanding
corporate bond stock for selling CDS protection.
3.2.7 Underdeveloped Securities Lending Market for Corporate Bonds: India has
a well-established security borrowing and lending (SBL) framework for equities,
developed in the early 2000s following the discontinuation of the “badla
12
” system.
However, this infrastructure has not extended to corporate bonds. The absence of
a robust lending mechanism limits market participants’ ability to manage inventory
efficiently and hinders secondary-market liquidity.
As part of efforts to deepen India’s corporate bond market, the Limited Purpose Clearing
Corporation (LPCC), operationalised as AMC Repo Clearing Corporation Limited (ARC), has
commenced operations. It is designed to handle the clearing and settlement of corporate
bond repo transactions and to develop an active and liquid repo market. The ARC platform
has already begun recording a reasonable volume of transactions.
11 Under current regulations, NBFCs in India can use CDS only for hedging, not for proprietary trading or market-making. This
restriction limits their ability to assume credit risk, an essential function for market-making, impacting the CDS market devel-
opment.
12 It allowed investors to carry forward their trades (particularly in equities) without settling them at the end of the settlement cycle. 22CORPORATE BOND MARKETCORPORATE BOND MARKET
To address these gaps, tri-party repos using corporate bonds as collateral were
introduced in 2018 to facilitate secured short-term funding. Despite this regulatory
initiative, the segment has seen limited uptake. Key barriers include low secondary
market liquidity, high credit risk, valuation difficulties, operational complexities,
and a continued preference for G-Secs in repo transactions. Without broader
participation and risk mitigation mechanisms, the potential of tri-party repos and
securities lending to deepen the corporate bond market remains unrealised.
3.3 Structural Constraints Across Some Key Segments
3.3.1 Preference for Highly Rated Issues: The limited presence of lower-rated debt
in India stems from a confluence of structural, regulatory, and market-driven factors,
leading to lack of availability of Risk Capital
13
. A large share of mid-sized firms
remains informal, with limited transparency and fragmented credit histories, making
accurate risk assessment difficult and hindering rating upgrades (GPFI, 2024). This,
combined with the dominance of highly-rated issuers, restricts access to risk capital
for emerging businesses, forcing them to rely on higher-cost options like bank loans
or private placements. Prudential regulations for institutional investors also raise the
capital cost or compliance burden associated with lower-rated debt, discouraging
their participation. Beyond the regulatory constraints, market dynamics also play
a role. The memory of past credit events, such as the defaults of IL&FS and DHFL,
has reinforced conservative investment behaviour, while poor liquidity in the lower-
rated segment further deters investor interest. Additionally, Lower-rated bonds face
challenges such as investor risk aversion, limited credit enhancement mechanisms,
and the dominance of high-rated issuances, which reduce demand and liquidity.
The lack of strong credit guarantees hinders lower-rated issuers from improving
their credit profiles, while the market’s preference for top-rated bonds sidelines risk
management for lower-rated securities.
3.3.2 Underdeveloped Market for Long-Tenor Products: There is a notable gap
in long-term investor participation in the corporate bond market compared to
the government securities market. Issuances in the long-term corporate bond
segment remain sparse, constraining market depth. Corporate bond tenures
in India fall notably short of those offered in the government securities (G-Sec)
market. This inadequacy restricts long-term institutional investors from effectively
matching their liability structures and managing reinvestment risk. India’s long-tenor
corporate bond segment remains underdeveloped due to low issuer appetite, weak
secondary-market liquidity, and regulatory restrictions, especially the institutional
bias toward AAA-rated short-term paper. Unlocking this space would help long-
term investors manage asset–liability mismatches while expanding funding options
for infrastructure and long-gestation projects.
13 Risk capital means funds that investors are willing to deploy into higher-risk assets with the expectation of earning higher returns. 23CORPORATE BOND MARKETCORPORATE BOND MARKET
3.3.3 Considerations impacting Green Bonds: Green bond issuance in India faces
hurdles like the absence of a standardised green taxonomy, raising greenwashing
14

concerns. India’s BBB- sovereign rating often prompts corporates to offer higher
coupons, thereby reducing the appeal of green bonds. Currency risk, liquidity issues,
and lack of tax incentives deter foreign and institutional investors, while investment
restrictions and sectoral concentration limit broader participation.
3.4 Challenges in Debt Recovery and Enforcement Mechanisms
3.4.1 Gaps in Recovery Infrastructure: Delays in the recovery process and low
recovery rates continue to pose challenges in the overall financing landscape.
15,16
The
absence of a comprehensive Public Credit Registry may affect the effectiveness of
credit risk assessment. In this context, investment avenues offering greater security,
such as secured debt, information-intensive bank lending, and private placements,
have gained prominence. Policymakers have responded by strengthening the
legal and regulatory frameworks for resolving and recovering bad debts. Until
approximately five years ago, bondholders had notably fewer recovery mechanisms
compared to banks in cases of borrower default or covenant breaches.
The introduction of the IBC marked a significant shift in India’s credit recovery framework by
offering a unified, time-bound mechanism for resolving insolvency. The IBC provided all financial
creditors, including bondholders, a legal avenue to initiate insolvency proceedings and participate
in the Committee of Creditors (CoC). This can improve legal clarity and confidence in the bond
market. IBC has generally yielded better recovery rates than other debt resolution mechanisms,
especially in its early years. However, its performance has varied over time, as well as by case size
and complexity. Despite its advantages, the IBC faces several challenges, including delays in the
admission of insolvency applications and the Corporate Insolvency Resolution Process (CIRP), as
well as judicial bottlenecks and large haircuts, which hinder its full potential. IBC data reveals that
recovery rates have been declining, with a majority of cases ending in liquidation. Creditors often
recover only a fraction of their claims, while smaller asset-light companies struggle to attract
buyers. The insolvency regime also faces hurdles in resolving personal guarantor liabilities and
coordinating insolvency across interconnected corporate groups.
As shown in Table 3.1, recovery rates remain modest across all channels, with Lok
Adalat and DRTs performing the weakest, while SARFAESI and IBC provide relatively
better outcomes. This aligns with the broader challenges of delayed recoveries and
large haircuts noted earlier, even as recent legal reforms, such as the IBC, have
improved creditor recoveries compared to older mechanisms.
14 Greenwashing occurs when a company or issuer misrepresents the environmental benefits of a project or uses green bonds for
activities that have little or no positive environmental impact.
15 “IBC Recovery Rates Have Fallen, Even as Average Resolution Time Has Increased: CRISIL,” The Hindu Business Line, November 24,
2023
16 “If Resolution Takes Long, Recovery Bound to Drop,” The Times of India, May 18, 2024 24CORPORATE BOND MARKETCORPORATE BOND MARKET
Table 3.1: NPAs of SCBs Recovered through Various Channels
Recovery
Channel
2022-23 (Amount in ₹ crore)
No. of cases
referred
Amount
Involved
Amount
recovered*
Col. (4) as per cent of
Col. (3)
12345
Lok Adalat 1,37,72,958 1,88,135 3,7742.0
DRTs 56198 4,02,753 39,7859.9
SARFAESI
Act
1,87,340 1,11,359 30,95727.8
IBC @ 1262 1,38,715 54,16139.0
Total 1,40,17,758 8,40,962 1,28,67615.3
Source: RBI
*Red indicates the lowest recovery and Dark Green indicates higher recoveries.
Table 3.2: Number of cases admitted and closed
Particulars
From Oct 2016 – Mar
31, 2024
In 2024-25
Total (As on Mar 31,
2025)
Total number of IBC
cases admitted
7,5847248,308
Total CIRPs cases
Closed
5,6677156,382
Source: IBC
As per Table 3.2, out of the 8,308 IBC cases admitted since October 2016, a total of
6,382 cases have been closed by March 2025, indicating that about 77% of the cases
admitted have reached closure.
From 2021–22 to 2023–24 under IBC, cases admitted fell from 13,337 to 10,775, cases
closed declined from 11,294 to 9, the total amount involved reduced from ₹155,985
crore to ₹127,596 crore, while the total amount recovered rose from ₹9,700 crore
to ₹11,937 crore
17
.
The average time taken for the CIRP under the IBC has been a subject of concern
since its inception in 2016. As of March 2025, the average resolution time stood at 713
days, significantly exceeding the statutory limit of 330 days (including extensions).
This extended duration has been attributed to various factors, including judicial
delays, complex corporate structures, and increased litigation during the resolution
process. Notably, 78% of ongoing CIRP cases have surpassed the 270-day threshold,
highlighting systemic bottlenecks within the resolution framework
18
.
17 https://www.data.gov.in/resource/year-wise-total-amount-involved-and-recovered-cases-referred-debt-recovery-tribunal-drt
18 https://www.icra.in/CommonService/OpenMediaS3? 25CORPORATE BOND MARKETCORPORATE BOND MARKET
3.5 Financial Literacy Gaps
3.5.1 Low Awareness and Investor Education: The corporate bond market in India
remains relatively new for retail investors, who often prefer traditional investment
options and may not fully understand the risks and benefits of corporate bonds, with
awareness often mediated through brokers rather than direct knowledge (Gwalani
& Bharati, 2015). Key determinants of investment decisions include returns, liquidity,
and safety. Therefore, enhancing financial literacy, promoting transparency, and
offering targeted tax incentives could help broaden retail participation. As noted by
Sankar (2022), India’s corporate bond market is dominated by domestic institutions
such as insurance companies, banks, and mutual funds, with limited retail and foreign
participation. While corporate bond issuances have grown by 72% between FY18 and
FY24 (NSE, 2024), the market is still primarily dominated by institutional investors, with
minimal retail participation.
SEBI data shows that at the end of
FY22, qualified institutional investors,
corporates, and mutual funds held
significant shares (27.5%, 24.5%, and 15.9%,
respectively) of outstanding corporate
bonds (Fig. 11). Retail participation
remains low (less than 2%)
19
, a trend
also seen globally. In more developed
markets like China, retail participation
is supported through exchange-traded
bonds, online bond trading platforms,
and simplified access points. Similarly, in
the U.S., retail investors can access bonds
more easily through mutual funds, ETFs,
and regulated broker-dealer platforms,
thereby ensuring greater inclusion.
According to SEBI’s latest data (2023-24), around 98% of corporate bond issuances
in India are conducted via private placements, which are primarily accessed by
institutional investors and are not available to the general public.
Retail participation in the debt market is generally low worldwide including India,
with some exceptions like municipal bonds in the U.S. and government bonds in
Brazil and Italy. According to a July 2024 survey, stocks were the most common
securities among private investors in Japan, with 73% of retail investors owning
stocks, while only 11.4% invested in public bonds
20
.
19 The Rising Impact of Retail Investors on Debt Capital Markets,” The Economic Times, July 23, 2025
20 “Common Types of Securities Held by Retail Investors in Japan, 2024.” Statista, June 6, 2025Source: SEBI 26CORPORATE BOND MARKETCORPORATE BOND MARKET
In the U.S., approximately 10% of corporate bonds are directly held by households,
with an additional 15–17% held indirectly through funds, facilitated by transparent
pricing and fractional trading platforms. Thailand sees 38.95% retail ownership, driven
by tax incentives, digital access, low entry thresholds, and supportive regulations.
The contrast shows developed markets rely more on financial innovation, while
developing ones may develop more through inclusive policy and access
21
.
3.6 Tax Implications impacting Bond Investments
3.6.1 Tax implications limit the interest in the bond markets
22
: Despite efforts to
develop India’s bond markets, specific tax provisions influence investor interest.
(i) Interest Income: Taxed as per the investor’s income tax slab, making them
less attractive than tax-free or tax-saving bonds. (For E.g., bonds issued
by Government-backed institutions like the National Highways Authority of
India).
(ii) TDS on Interest: A 10% TDS applies on interest exceeding ₹10,000 annually
unless Form 15G/15H is submitted, which complicates transactions between
tax-exempt and non-exempt entities. TDS is deducted based on the
bondholder on the record date, not the actual interest recipient, resulting
in tax-exempt entities facing wrongful deductions, refund delays, and TDS
credit mismatches, which disrupt cash flows and compliance.
(iii) Capital Gains Taxation:
yListed Bonds: STCG (≤12 months) taxed at slab rate; LTCG (>12 months)
taxed at 12.5% without indexation.
yUnlisted Bonds: With effect from July 2024, any income arising from the
transfer, redemption, or maturity of such unlisted debentures or bonds
will be deemed to be short-term capital gains, irrespective of the holding
period. As a result, taxpayers will be taxed at their applicable income tax
slab rates (or any special rates applicable to short-term capital gains),
and the benefit of indexation will no longer be available.
(iv) No Section 80C Benefit: Unlike PPF, EPF, or ELSS mutual funds, corporate
bonds do not qualify for tax deductions under Section 80C (discussed later
in context of new tax regime).
(v) FPI Taxation: Withholding tax (WHT) for FPI investors in India is generally
favourable. Interest income from rupee-denominated corporate bonds is
subject to a concessional 5% WHT until July 1, 2025. There is no WHT on capital
gains, simplifying exits. FPIs from countries with Double Taxation Avoidance
21 Refer Exhibit 3 under Section 3 of the Appendix to read more about the global scenario
22 Refer Exhibit 4 under Section 3 of the Appendix for tax comparison across different instrument types 27CORPORATE BOND MARKETCORPORATE BOND MARKET
Agreements (DTAAs) can benefit from even lower rates, provided they submit
the required documentation (e.g., Tax Residency Certificate). An unfavourable
aspect of the withholding tax regime is that the concessional 5% rate on interest
income is time-bound and only valid until July 1, 2025, creating uncertainty
for long-term investments. Additionally, strict compliance requirements, such
as obtaining a PAN, Tax Residency Certificate, and other documentation, are
essential to avoid higher default withholding rates, which can add administrative
burden and impact returns.
A vibrant corporate bond market can ease credit constraints by enabling firms to access
capital directly, reducing dependence on bank loans. This unlocks banking resources for
priority sectors like rural credit, SMEs, and infrastructure, advancing financial inclusion
and supporting India’s “Viksit Bharat @ 2047” vision. The next section explores cross-
country experiences and best practices to guide India’s market development. 28CORPORATE BOND MARKETCORPORATE BOND MARKET
Section 4
Cross-Country
Analysis: Best Practices 29CORPORATE BOND MARKETCORPORATE BOND MARKET
4. Cross-Country Analysis: Best Practices
This section presents a comparative analysis of key bond market indicators across select
countries, examining successful international approaches to developing corporate bond
markets. The objective is to identify practical, adaptable strategies that can inform India’s
efforts to cultivate a more robust, resilient, and dynamic bond ecosystem.
4.1 Cross-Country Comparison of Corporate Bond Markets on Various Parameters
4.1.1 Market Size as a Share of GDP and Contribution to the Global Market: Fig. 12a
presents a comparative picture of the size of corporate bond markets across
select major and emerging economies, measured as a percentage of GDP for
2023. India’s corporate bond market accounted for 14% of the country’s GDP in
2023, well below that of countries such as South Korea (79%), Malaysia (54%),
and China (38%).
Source: Asiabondsonline & NSE
In contrast, developed markets such as
the USA and China collectively account
for over half of the global corporate
bond market. Within Europe, France,
Netherlands, Italy, and Spain is the key
issuers, while in Asia, Japan stands out
with around a 4% global share each.
Figure 12b shows that the USA and China
together account for over 50% of the
total corporate bond market.
Source: cbonds 30CORPORATE BOND MARKETCORPORATE BOND MARKET
4.1.2 Issuance Volume in Non-Financial Sector: The corporate bond issuance
as a percentage of GDP across major economies is presented in Fig. 13. Corporate
bond issuance, here, refers to the total volume of newly issued corporate bonds
by private entities in industries other than the financial sector. India consistently
records one of the lowest issuance volumes, remaining below 1% of GDP since 2012.
In contrast, the United States leads with issuance ranging between 5% and 7.5% of
GDP
23
. China reports relatively high issuance levels, maintaining a steady average of
around 3.5% of GDP. Brazil consistently recorded issuances of around 2% of GDP.
Source: WorldBank
4.1.3 Outstanding Bonds Size in Non-Financial Sector (OECD, 2025): Figure 14
highlights the variation in the outstanding size of the corporate bond market for
non-financial companies across Asian economies. While non-financial corporations
in Asia collectively hold USD 4 trillion in outstanding corporate bonds, which is
equivalent to 11% of the region’s GDP, there remain cross-country differences. China
leads in absolute volume of outstanding bonds but shows relatively modest ratios
to GDP. In contrast, Japan, South Korea, and Thailand report higher bond-to-GDP
ratios at 15%, 19%, and 21% respectively. These differences reflect varying levels of
market development, regulatory structures, and reliance on capital markets. This
diversity in market depth reflects differences in financial infrastructure, regulatory
frameworks, and the maturity of capital markets within the region. Asian markets
exhibit a pronounced dependence on bank financing. Overall, in Asia, bank credit
extended to non-financial companies accounts for 143% of GDP, significantly higher
than the global average of 96%.
23 The surge in 2020 can be attributed, to the Federal Reserve’s intervention in the market. For more information: “When COVID-19
Reached the Corporate Bond Market”-Federal Reserve Bank of Philadelphi a 31CORPORATE BOND MARKETCORPORATE BOND MARKET
Source: OECD
4.1.4 Credit Rating Distribution: Strong preference for AAA-rated bonds dominates
the issuance landscape. On the other hand, bonds with lower ratings, such as A, BBB, or
BB, are less frequently issued and traded, primarily because they are deemed riskier. As
a result, approximately 85-90% of bond issuances in India fall within the AAA and AA
rating categories. Additionally, the investor base in India is generally conservative, and
the limited number of highly rated bonds further limits their investment options. The
proportion of AAA ratings assigned by CRAs in India are lower than those of national-
scale ratings assigned by domestic CRAs in other economies (Crisil, 2019). In countries
like China or South Korea, the availability of higher-rated corporate bonds is more
widespread.
Advanced economies, such as the US, have well-developed and expansive bond
markets. The US market also sees significant participation across the entire credit
spectrum, including high-risk junk bonds, reflecting strong investor appetite. This
broad demand means that US companies, or global firms, have less incentive to
maintain a top-tier AAA rating since they can access funding even with lower ratings
at competitive costs. This flexibility allows them to enhance shareholder returns.
For example, in 2017, fewer than 5% of US bond issuances were from AAA-rated
companies, while A- and BBB-rated companies accounted for more than 60%, and
speculative-grade firms accounted for around 20% (Crisil, 2019).
4.2 Cross-Country Comparison of Corporate Bond Markets: Best Practices
This section considers the experiences of countries where corporate bonds account
for a sizeable share of overall financing and GDP. These economies have actively
pursued measures to strengthen regulation, deepen market liquidity, and build robust
infrastructure, supported by sustained policy focus. As a result, corporate bond
markets have become key pillars of corporate financing, highlighting the critical role
of sound regulation, strong institutions, and efficient market infrastructure.
4.2.1 United States
(i) Regulatory Framework: The U.S. mandates stringent disclosure
requirements for corporate bond issuers, ensuring that investors have
access to comprehensive and accurate information. The Dodd-Frank Act 32CORPORATE BOND MARKETCORPORATE BOND MARKET
of 2010 introduced significant reforms to enhance the accountability and
transparency of CRAs.
24
According to the Act, CRAs are required to register
with the SEC, undergo annual compliance reviews, and disclose their
methodologies, performance data, and conflicts of interest.
(ii) Market Infrastructure: The U.S. has developed a robust market infrastructure,
including electronic trading platforms. The Trade Reporting and Compliance
Engine (TRACE) system, developed by FINRA, provides real-time reporting
of bond transactions, improving transparency and liquidity.
(iii) Innovation and Product Development: The use of tax credit bonds, such
as Build America Bonds (BABs), Clean Renewable Energy Bonds (CREBs),
Municipal Bonds and Qualified Energy Conservation Bonds (QECBs), has
proven effective in financing specific public projects and incentivising
investment by providing tax credits to investors, thereby reducing the
borrowing costs for issuers.
(iv) Development of High-Yield and SME Bond Market: The key regulations that
led to the development of the high-yield bond market were Rule 144A under
Regulation D of the Securities Act of 1933. Introduced in 1990, Rule 144A enabled
institutional investors to trade privately placed securities, thereby increasing
liquidity and facilitating the issuance of high-yield bonds by companies with
lower credit ratings.
25
For the SME bond market, the JOBS Act (2012)
26
played
a crucial role by easing securities regulations for smaller companies.
(v) Market Making & Liquidity: The Federal Reserve has established facilities
like the Primary Dealer Credit Facility (PDCF) to provide liquidity to primary
dealers. It provided primary dealers with collateralised term funding,
accepting a wide range of investment-grade debt and equity securities.
27

In response to the COVID-19 pandemic, the Federal Reserve launched
the Secondary Market Corporate Credit Facility (SMCCF) to purchase
corporate bonds, thereby enhancing liquidity and ensuring continued credit
availability.
28,29
(vi) Benchmarks for Enhancing Liquidity in the Bond Market: The Bloomberg
Barclays US Corporate Bond Index serves as a benchmark for the corporate
bond market, allowing investors to gauge performance and risk-return
dynamics. It enhances secondary-market liquidity, price transparency, and
investor confidence by providing a reliable benchmark for investment-grade
corporate debt.
24 U.S. Securities and Exchange Commission. Dodd-Frank Act Rulemaking: Credit Rating Agencies. Last modified September 5, 2014.
25 “Capital Markets, Overview: Rule 144A High-Yield Debt Offering (Pre-Transaction Considerations).” Bloomberg La
26 “Text-H.R. 3606: Jumpstart Our Business Startups Act, 112th Cong. (2012),” Congress.gov, Library of Congress
27 Board of Governors of the Federal Reserve System, “Federal Reserve Board Announces Establishment of a Primary Dealer
Credit Facility (PDCF) to Support the Credit Needs of Households and Businesses,” press release, March 17, 2020
28 Board of Governors of the Federal Reserve System, “Secondary Market Corporate Credit Facility (SMCCF),” Federal Reserve
29 Refer Exhibit 1 under Section 4 of the Appendix to read more about Apollo’s role in enhancing market liquidity. 33CORPORATE BOND MARKETCORPORATE BOND MARKET
4.2.2 European Union (EU)
(i) Transparency and Investor Protection: (MiFID II, MiFIR)
30
: MiFID, introduced
in 2007, aimed to harmonise regulations across EU member states and foster
competition. MiFID II, effective from Jan, 2018, updated and strengthened
these rules, focusing on greater investor protection, enhanced transparency,
and market stability, with emphasis on bond trading.
(ii) Regulatory Practices implemented stringent regulations to oversee CRAs
31
:
Regulations seek to reduce over-reliance on credit ratings by encouraging
independent risk assessments by institutions. CRAs are also required to
enhance transparency by disclosing methodologies, models, and key rating
assumptions.
(iii) EU’s Key Information Document (KID)
32
: KID is mandated under the
Packaged Retail and Insurance-based Investment Products (PRIIPs)
Regulation in the European Economic Area (EEA) and the United Kingdom.
The PRIIPs Regulation, in effect since 1 January 2018, aims to help retail
investors understand and compare the key features, risks, rewards, and costs
of different investment products by providing a standardised KID.
(iv) Benchmarks in Enhancing Liquidity in the Bond Market:
yiBoxx EUR Corporate Bond Index
33
: A benchmark index that represents
the investment-grade fixed-income market for EUR-denominated bonds,
encompassing corporate, sovereign, sub-sovereign, and collateralised
bonds.
ySupport for high-yield and SME bond markets: Euro MTF (Luxembourg),
an alternative market operated by the Luxembourg Stock Exchange, offers
flexible listing and lighter disclosure requirements that allow lower-rated
entities to issue securities more efficiently. The Capital Markets Union
(CMU) Initiative, led by the European Commission, aims to mobilise capital
and enhance access to financing, particularly for SMEs, fostering a more
integrated and efficient capital market.
Italy Mini-Bond Market framework provides tailored issuance frameworks for mid-sized and
lower-rated companies. Introduced in 2012, it enables unlisted SMEs to issue bonds of up
to EUR 50 million under simplified regulatory conditions compared to standard corporate
bonds. These instruments can also be backed by state credit guarantees, provided upon
investor request. Evidence indicates that the minibond regime has played a valuable role in
helping SMEs become more familiar with capital market instruments, while also contributing
to improved bank lending conditions for participating firms over time. [Ongena et.al., (2021);
Croce et.al., (2025)].
30 “MiFID II/R.” ICMA
31 “Regulating Credit Rating Agencies,” European Commissio
32 “PRIIPs — Overview and FAQs,” HSBC Private Bank
33 iBoxx EUR Benchmark Indices Factsheet (PDF, May 2020), HIS Markit 34CORPORATE BOND MARKETCORPORATE BOND MARKET
4.2.3 China
(i) Regulatory Measures: Before 2023, oversight was split between the China
Securities Regulatory Commission (CSRC) and the National Development
and Reform Commission (NDRC), leading to inconsistencies. In March 2023,
regulatory control was unified under the CSRC, standardising disclosure
requirements. The introduction of the “Administrative Measures for the
Issuance and Trading of Corporate Bonds”
34
further streamlined issuance and
improved market transparency. Additionally, tax incentives have played a role
in stimulating bond market growth. The Shanghai Stock Exchange (SSE) has
revised its guidelines for corporate bond issuance and listing to improve capital
access for sectors deemed strategically significant.
(ii) Leveraging the Asian Infrastructure Investment Bank (AIIB) and Panda
Bonds
35
: China effectively promoted Panda Bonds, which allow foreign
entities to raise funds in China’s onshore market. The AIIB has played a crucial
role by providing credit guarantees, making these bonds more attractive to
investors. For instance, Egypt issued RMB 3.5 billion in Panda Bonds backed
by AIIB.
(iii) Capital Supervision: In China, bond issuance is governed by the National
Association of Financial Market Institutional Investors (NAFMII) and CSRC,
with disclosures tailored to issuer type. For highly rated entities, particularly
within green finance, the green channel facilitates fast-track approval using
standardised templates and prioritised regulatory review, accelerating timelines
and lowering costs.
China, continues to lead the green bond issuance in 2023 in the world with over 80% of
issuances from the state-owned enterprises (Climate Bonds Initiative, 2024). Their domestic
green bonds market is well-aligned with the International Capital Market Association (ICMA)
and other relevant regulations. It was the first country to issue country-specific bond
issuance guidelines in 2015. These include the launch of the Bond Connect Scheme in 2017,
which facilitated greater foreign investor access to the onshore bond market; a partnership
with the Luxembourg Stock Exchange to publish green bond price and yield information
internationally; and the introduction of a 25% tax exemption on interest income from green
bonds for retail investors, aimed at boosting domestic participation. [Sustainability Report,
HKEX, 2025; ORF, 2019]
4.2.4 Hong Kong
(i) Hong Kong’s Tokenised Green Bonds (ICMA, 2024): Hong Kong has
pioneered the adoption of tokenised government green bonds
36
, leveraging
34 Sebastian Guo and Peter Knaack, “Two Sessions 2023: Reforming China’s Financial Governance,” Council on
Economic Policies Blog, March 22, 2023
35 China’s ‘World Bank’ Gives Backing to Wave of Renminbi Bonds,” Financial Times, October 2, 2024
36 A tokenised green bond is a digital version of a traditional green bond issued on a blockchain to fund environ-
mentally sustainable projects with enhanced transparency and efficiency. 35CORPORATE BOND MARKETCORPORATE BOND MARKET
distributed ledger technology (DLT) to enhance efficiency, transparency,
and accessibility in bond markets. The Hong Kong Monetary Authority
(HKMA) successfully executed the world’s first tokenised government green
bond in 2023, reducing settlement time from T+5 to T+1 and streamlining
post-issuance processes.
(ii) Green and Sustainable Finance Grant Scheme (GSF Grant Scheme): This
initiative subsidises eligible bond issuers and loan borrowers for expenses
related to green and sustainable debt instruments. It covers 50% of general
bond issuance costs (up to HK$2.5 million) and 100% of external review costs
(up to HK$800,000). In May 2024, the scheme was extended by three years
to 2027 and expanded to include Transition Bonds
37
, encouraging industries to
utilise Hong Kong’s Transition Financing Platform
38
for decarbonization efforts.
4.2.5 Japan
(i) Regulatory Reforms: During the 1990s, Japan implemented a series of
deregulatory measures to facilitate corporate bond issuance which included
the removal of issuance limits in 1993, the relaxation of bond covenant
requirements in 1996, and reforms to the trustee company system aimed
at enhancing market efficiency and improving issuer access to the bond
market (Horiuchi, 1996; Baba, Nishizaki et al, 2002).
(ii) Other Policy Initiatives:
yThe Bank of Japan’s Corporate Bond Purchase Programme (Nguyen,
2024): It is a monetary policy tool aimed at supporting corporate
financing and stabilising financial markets.
yCorporate Bond Market Functioning Index (CBMFI) (Ochi & Osada,
2024): A composite index developed by the BOJ to assess the health
and efficiency of the corporate bond market. It aggregates various
measures related to transaction prices, trading volumes, and the trading
environment in both primary and secondary markets.
yThe Japan Bank for International Cooperation (JBIC) offers guarantees
on bonds issued by Japanese subsidiaries overseas, helping them tap
local capital markets more effectively. This guarantee aligned with the
broader mandate to mitigate political, currency, and counterparty risks
for Japanese companies abroad.
37 Transition bonds are a type of sustainable debt instrument designed to help companies in high-emission sec-
tors (like energy, manufacturing, or transportation) shift toward low-carbon operations.
38 Hong Kong’s transition financing platform is a multi-agency initiative designed to support industries, especially
high-emission sectors, in their shift toward net-zero carbon emissions. It’s not a single physical platform, but
rather a coordinated ecosystem of policies, tools, and resources. 36CORPORATE BOND MARKETCORPORATE BOND MARKET
4.2.6 South Korea
(i) Innovation and Product Development: New financial products like CDS,
derivatives, and bond ETFs have improved risk management, market access,
and liquidity. The Bank of Korea issued Monetary Stabilisation Bonds (MSBs) to
manage rising foreign reserves, while asset-backed securities (ABSs) supported
financial and corporate sector restructuring, aiding market growth.
(ii) Tax and listing incentives to bolster its bond market and overall economic
growth (Asian Development Bank, 2024):
y Support for Interest Payments under the K-Taxonomy: The South Korean
Ministry of Environment (MOE) provides interest subsidies for issuers of
Sustainable and Responsible Investment (SRI) bonds are listed on the
dedicated SRI Bonds platform operated under the K-Taxonomy.
y Initial and Annual Listing Fee Exemptions: Korea Exchange (KRX)
temporarily exempted listing fees for debt securities in the SRI Bonds
segment, covering five years since 2020.
(iii) South Korea’s Credit Guarantee Mechanisms: South Korea has implemented
several measures to support lower-rated bonds and enhance market
diversification facilitated by Korea Credit Guarantee Fund (KODIT)
39
, Korea
Development Bank (KDB)
40
and Market Stabilisation Funds
41
.
4.2.7 Singapore
(i) Facilitating easier access for retail investors: The Monetary Authority of
Singapore (MAS) in 2016 introduced new frameworks were introduced to
mak make corporate bond offerings more accessible to retail investors.
42
yBond Seasoning Framework: Wholesale bonds
43
meeting the eligibility
criteria stipulated by SGX and listed on SGX for at least 6 months can be
re-denominated into smaller lot sizes and offered to retail investors on
the secondary market.
yExempt Bond Issuer Framework: Issuers that satisfy specified thresholds
that are higher than the eligibility criteria under the Bond Seasoning
Framework can offer bonds directly to retail investors at the start of an
offer without a prospectus.
39 Korea Credit Guarantee Fund. “Credit Guarantee.”
40 Green Climate Fund. “Korea Development Bank (KDB).”
41 Ministry of Economy and Finance. “Emergency Meeting on Macroeconomic and Financial Stability.” October 23, 2022.
42 Monetary Authority of Singapore. 2016. “MAS Makes It Easier for Retail Investors to Buy Corporate Bonds.” Monetary Authority
of Singapore, May 19, 2016.
43 Wholesale bonds refer to bonds that are offered only to institutional and accredited investors or in large denominations of at
least S$200,000. Such offers are exempted from prospectus requirements under sections 274 and 275 of the Securities and
Futures Act (Cap 289). 37CORPORATE BOND MARKETCORPORATE BOND MARKET
yTax Concession: Singapore grants eligible issuers tax concessions of up
to twice the issuance costs for retail bonds, encouraging firms to tap the
retail market.
yLow-Denomination Bonds: Availability of lower-denominated bonds
with minimum investments starting from SGD 1,000. They also offer a
variety of bond ETFs listed on the Singapore Exchange (SGX), providing
investors with diversified exposure to fixed-income securities.
yG-ADBGS (MAS, 2025): In January 2025, the MAS launched the Global-
Asia Digital Bond Grant Scheme (G-ADBGS) to promote the issuance
and adoption of digital bonds to catalyse the digital bond market by
providing funding support.
Singapore’s Corporate Bond Market Development: A Sequenced Approach
Singapore’s corporate bond market is widely regarded as a successful case of sequenced
and well-coordinated reforms. This approach ensured that each stage of reform built on the
foundations laid by the previous phase, thereby supporting sustainable market development.
The timeline table (refer to Exhibit 2 under Section 4 of the Appendix) presents a chronological
sequence of key initiatives, highlighting how Singapore calibrated its approach, from initial
market liberalisation and benchmarking, through regional integration and investor incentives,
to more recent efforts focused on retail access, ESG financing, and digital innovation, to build
a vibrant and diversified corporate bond ecosystem.
4.2.8 Malaysia
(i) Market Infrastructure: Malaysia enhanced bond market efficiency by
introducing centralised clearing systems and setting up the Bond Pricing
Agency for transparent valuation.
(ii) Tax Incentives: The government has granted stamp duty exemptions for
primary and secondary market transactions to encourage bond issuance
and trading. Non-residents are exempt from withholding tax on interest
income from Malaysian bonds.
(iii) DanaInfra & Danajamin (Malaysia’s Credit Enhancement Model)
44
: Malaysia
established Danajamin Nasional Berhad in 2009 to provide credit guarantees
for bonds, including the sukuk bonds.
45
Since its inception, DanaInfra & Danajamin has enabled 42 companies from diverse sectors
to tap the local bond market, guaranteeing RM10.5 billion in debt securities as of the end of
2019. Additionally, DanaInfra Nasional Berhad, another state-backed entity, has facilitated
infrastructure financing through bonds, ensuring large-scale projects can access long-term
funding without overburdening banks. Danajamin Nasional Berhad (“Danajamin”) has now
merged with Bank Pembangunan Malaysia Berhad (“BPMB”) Group (a DFI under Malaysian
44 International Institute for Sustainable Development, Danajamin, Malaysia: Credit Enhancement for Infrastructure, last modified 2020,
45 Refer Exhibit 4 under Section 4 of the Appendix to read more about DanaInfra & Danajamin’s role in infrastructure financing. 38CORPORATE BOND MARKETCORPORATE BOND MARKET
Ministry of Finance wef 1st March 2023. [(Bank Pembangunan Malaysia Berhad, 20230]
This merger was part of the Government’s medium-term plan to strengthen and align the
mandates of DFIs to improve the national development finance ecosystem. (World Bank,
September 2020)
4.2.9 Brazil
(i) Streamlined Issuance: Within Brazil, Comissão de Valores Mobiliários (CVM)
Resolution
46
160/22 permits automatic registration for frequent issuers
and offerings targeting professional investors, removing pre-approval
requirements, streamlining documentation and shortening issuance
timelines.
(ii) Tax Incentives for Foreign Investors: In 2022, Brazil exempted foreign
investors from withholding tax (under Provisional Measure 1,137/22)
47
on
interest income from corporate bonds issued by non-financial firms and
credit funds.
(iii) Government-Backed Financial Institutions: Institutions like the Brazilian
Development Bank (BNDES) have been instrumental in providing long-term
financing.
(iv) Various tax legislative changes in Brazil aimed at encouraging investments,
particularly in infrastructure
48
:
yLaw 12,431: Enacted in 2011, provides tax incentives to promote long-
term investment in infrastructure via listed bonds aimed at longer-term
maturities.
yTax Exemptions on Infrastructure Bonds: Tax exemptions are granted on
income from infrastructure-linked bonds to both domestic and foreign
investors.
yNew Infrastructure Debentures (Law 14,801/2024)
49
: Issuers of the new
infrastructure debentures can reduce their tax base by an additional 30%
of the interest paid to debenture holders.
yInfrastructure Offshore Bonds - Zero WHT: Interest on foreign loans
raised through bonds issued in international markets for infrastructure
projects is exempt from WHT.
46 Lefosse Advogados, CVM Resolution 160: New Regulatory Framework for Public Offerings, August 5, 2022,
47 Lefosse Advogados, Provisional Measure 1,137/2022 Introduces Significant Tax Incentives for Investments by NonResident
Investors in the Brazilian Capital Markets, September 22, 2022
48 Mayer Brown, Brazil’s New Tax Rules for Infrastructure Investments, January 19, 2024,
49 Luis Montes, Priscilla Santos, Beatriz Lavigne, Bruno Werneck, Juliana Deguirmendjian, and Raphael Furtado, Infrastructure
Financing: New Options and Incentives for Financing in Brazil, January 17, 2024 39CORPORATE BOND MARKETCORPORATE BOND MARKET
4.2.10 Thailand
(i) Centralised Bond Registration and Market Surveillance
50
: The Thai Bond
Market Association (ThaiBMA), licensed under the Securities and Exchange
Commission (SEC), centralises bond registration and market surveillance.
All bonds, except specific private placements and short-term commercial
papers, must be registered with ThaiBMA.
(ii) Digital Infrastructure for Bond Issuance
51
: The SEC has developed the
Digital Infrastructure for Bond Issuance and Trading (DIF) platform,
facilitating electronic bond offerings. In 2024, the SEC tested the DIF Portal
to streamline the issuances and attract institutional investors.
(iii) Bond Investor Registration (BIR): Bank of Thailand’s (BOT) BIR system
tracks investor profiles at the Ultimate Beneficial Owner (UBO) level to
enhance transparency and manage capital flows
52
.
50 Thai Bond Market Association. 2021. “About Thai Bond Market.” Last modified September 2021. Accessed September 7, 2025.
51 Polkuamdee, Nuntawun. “SEC Prepares Digital Bond Offerings Valued at B6.7bn.” Bangkok Post, May 4, 2023.
52 Asian Development Bank. 2021. The Bond Market in Thailand: An ASEA N+3 Bond Market Guide Update. 40CORPORATE BOND MARKETCORPORATE BOND MARKET
4.3 Benchmarking India’s Corporate Bond Market Against Other Economies
Table 4.1: Bond Market Fundamentals: India vs USA and China
FeatureUSAIndiaChina
Market Size &
Growth
As of the third quarter of 2024, the US
corporate bond market was valued at
$11.2 trillion, up 6.1% from the previous
year (Securities Industry and Financial
Markets Association, 2025).
India’s corporate bond market is valued at
around $0.56 trillion as of March 2024 (22% of
the outstanding bond market and ~15 % of GDP).
It appears to be set for even faster growth,
having clocked a compound annual growth rate
(CAGR) of ~9% over the past five years (NSE &
ASSOCHAM, 2024).
The outstanding amount of Chinese
corporate bonds increased to $6
trillion in 2022, accounting for 34% of
China’s total bond outstanding (Asian
Development Bank, 2022).
Trading
Mechanism
40% of investment-grade bonds and
one-third of high-yield bonds are traded
electronically, with the RFQ protocol
(60%) dominating and CLOB (central
limit order book) used by retail investors
(7% of market volume) (Securities
Industry and Financial Markets
Association, 2023).
30% of corporate bonds are traded on the
Request for Quote (RFQ) Platform. The Platform
has seen strong corporate bond trading,
accounting for ~26% of total trading across
exchanges and OTC markets in FY 2024. FY
2024, the Electronic Bidding Platform (EBP)
accounts for 98% of total private placements
(NSE & ASSOCHAM, 2024).
Bonds are trades executed on the CFETS
(China Foreign Exchange Trade System)
RMB
53
Trading System, accessible
to offshore investors via Tradeweb,
Bloomberg, or MarketAxess.
Private
Placement
A total of $50.3 billion was raised in 1,354
transactions throughout 2023 in the U.S.
PIPE and Private Placement markets.
54
In 2023-24, public corporate bond placements
in India were around `19,000 crore, compared
to `8.38 trillion in private placements
55
. Private
placements have grown significantly, from `3.23
trillion in 2014 to `8.38 trillion in 2024. Public bond
issuances dropped from 12% of total corporate
bond issuances in 2014 to just 2% in 2024.
Investor Base
Foreign investors account for 28% of
share, followed by Institutional investors
such as insurers hold ~23%, pension funds
at 5% while retail investors represent 7%
of market volume.
Largely dominated by domestic institutions with
institutional investors, trusts and mutual funds
comprising (42%), body corporates (25%), banks
(14%) and FPIs/others (8%) (Sankar, 2022).
Largely dominated by commercial
banks and mutual funds. As of July
2021, international investors held 3.2%
of the total outstanding bonds (Chief
China Economist’s Office, Hong Kong
Exchanges and Clearing Limited, 2022).
Credit Rating
Distribution
The U.S. Corporate Bond Index includes
only investment-grade securities with
minimum Baa3/BBB-/BBB- or higher
ratings.
Indian corporate bond market is skewed towards
top-rated borrowers. In FY22 80% issuances in
value terms were by AAA rated entities and 15%
by AA rated companies (ASSOCHAM, 2023).
Skewed towards AAA ratings. Of the
1,500 bonds covered by the top four
agencies, 70% are rated AA or higher,
with 900 earning the top AAA rating,
according to Bloomberg (Jul,2017).
53 RMB stands for Renminbi, meaning “people’s currency” in Chinese. It is the official currency of the People’s Republic of China.
54 EPFR- Placement Tracker Publishes 2023 PIPE and Private Placement Markets League Tables
55 Roy Bardhan, A. R. (2024, June 10). 10k apiece: Will corporate bonds matter now in India? ORF Expert Speak Raisina Debates. Observer Research Foundation. 41CORPORATE BOND MARKETCORPORATE BOND MARKET
Table 4.2: Bankruptcy Process & Recovery Rates in India vs other countries
CountryBankruptcy ProcessRecovery Rates
India
Corporate bond defaults are addressed under the IBC 2016,
enabling creditors or debtors to initiate proceedings via the NCLT. A
resolution professional leads the process, and if recovery fails within
330 days, liquidation follows.
Recovery rates under the IBC peaked at 43% in FY2018–19 but
fell to 27% in FY2023–24, bringing the cumulative average to
about 32%. The decline reflects delays and a rise in distressed,
non-operational firms.
China
In China, insolvency begins with a debtor or creditor petition to
the People’s Court, which appoints an administrator within five
days. Creditors file claims (typically within 30–90 days) and pursue
reorganization or workouts; if unsuccessful, assets are liquidated by
creditor priority.
56
As per S&P Global Ratings’ China Bond Recovery Review 2023,
which examines all nonfinancial bond defaults from Jan 2015
through Oct 2023:
• Out-of-court restructurings: 46 % average recovery.
• In-court processes: 11 % average recovery
USA
Under Chapter 11, a voluntary or involuntary petition triggers an
automatic stay, with the firm operating as a debtor-in-possession.
The DIP has 120 days to propose a reorganisation plan, which
bondholders vote on; court approval requires each class to receive
at least its liquidation value.
57
For Jan 2022 - Sep 2023, bonds averaged a 68% recovery,
above their long-term average, with majority emerging from
default following a distressed exchange or non-bankruptcy
restructurin g S&P Global Ratings’ Credit Research, 2023).
Thailand
In Thailand, creditors can seek business rehabilitation under Section
90/12 of the Bankruptcy Act, triggering a court-appointed planner
and an automatic stay. If approved by at least two-thirds of the debt
value and the court, the planner’s proposal becomes binding. The
process is lengthy, with bondholders relying on trustees and legal
advisors.
58
Public data on corporate bond recovery rates in Thailand
(e.g., 20–40% range) appears limited or unpublished. Financial
Restructuring Authority (FRA) auctioned 80 percent of the
roughly $23 billion of assets seized from the closed finance
companies, with an average recovery rate of 28 percent of the
principal amount. (IMF Staff Country Reports (Thailand, 2000)).
Brazil
Under the 2005 Bankruptcy Law
59
allows three paths: judicial
reorganisation with a 180-day stay and a court-approved plan;
extrajudicial reorganisation requiring 60% creditor approval; and
bankruptcy liquidation, where assets are sold in accordance with
creditor priority.
Recovery rates in Brazil vary widely; first-lien debt has historically
been recovered at up to 84%, while subordinated bonds have
averaged 13% (S&P Global). Recent trends show declines; senior
unsecured recovery fell to 34% (2012–16), with cases like OGX
near zero. In 2024, InterCement bondholders may recover as
little as 45% (WSJ).
Malaysia
In Malaysia, bondholders can issue a statutory demand, which, if
unpaid within 21 days, may lead to a winding-up petition. Companies
may pursue restructuring through schemes, Judicial Management,
or CVA, while larger firms (with debts exceeding RM10 million) may
utilise the CDRC for out-of-court resolution.
60
Exact recovery rates are not disclosed.
56 National People’s Congress of China. 2006. Enterprise Bankruptcy Law of the People’s Republic of China. Updated February 24, 2021.
57 U.S. Courts. “Bankruptcy Basics.” U.S. Courts, Administrative Office of the U.S. Courts.
58 Pornavalai, Cynthia M. 2011. Bankruptcy Law in the Kingdom of Thailand. Tilleke & Gibbins, April 27.
59 Picot, Isabel, and Rodrigo Saraiva Garcia. 2024. “Insolvency 2024 – Brazil.” Chambers and Partners. Last modified November 14, 2024. https://practiceguides.chambers.com/prac-
tice-guides/insolvency-
60 BIX Malaysia. 2019. “What Happens When Your Bond or Sukuk Has Defaulted?” BIX Malaysia. Last modified June 25, 2019. 42CORPORATE BOND MARKETCORPORATE BOND MARKET
Table 4.3: Tax treatment for holders of corporate bonds for select economies (OECD, 2024)
CountryTax on interest paymentsCapital gains taxation (CGT) rate
61
Withholding tax (WHT) for foreign
investors
62
China
Individual: 20% Company: 25% (exception
for perpetual bonds)
Individual: 20% Company: 25%
10%, or 5% for bonds regularly traded
on recognised exchanges
Hongkong (China)
0% / 16.5% (subject to two-tier rate)
(Qualifying Debt Instruments concession/
exemption or exempt per Unified Fund
Regime if under the 5% cap)
ExemptedExempted
IndiaTaxpayers’ marginal tax rate
For Listed Bonds, STCG (≤12 months)
is taxed at the slab rate; LTCG (>12
months) is taxed at 12.5% without
indexation.
5% on interest income till Jul 25. May
have reverted to 20% unless reduced
under the Double Taxation Avoidance
Agreement (DTAA)
Japan20.3%20.3%15.3%
Korea
Individual: 15.4% (income tax 14%; local
tax 1.4%)
Exempted
Individual: 15.4% (income tax 14%; local
tax 1.4%)
Singapore
10-17% (Qualifying Debt Securities
concession)
Exempted
0-15% (Qualifying Debt Securities
exception)
Thailand
Individual: 15% Company: 1% withholding
tax and included in corporate income tax
Individual: 0-15%
Company: 0% or corporate tax rate
(zero coupon bond exemption)
Individuals: 0-15%
Companies: 0-15% (zero coupon bond
exemption)
VietnamCorporate tax rate20%
Corporate tax at a deemed rate of 0.1%
of the gross sales proceeds
61 CGT may apply in a jurisdiction more broadly; it does not necessarily apply to gains relating to corporate bonds.
62 If double tax agreements exist between jurisdictions, then WHT is not applicable 43CORPORATE BOND MARKETCORPORATE BOND MARKET
Table 4.4: International Comparison: Regulations for Institutional Investors for investment in Corporate Bond Markets
JurisdictionInsurance CompaniesPension Funds
USA
- Regulated by NAIC
- Mainly invest in investment-grade corporate bonds
because they’re safer and require less capital under NAIC
regulations
63
- Can invest in lower-rated bonds, but face stricter capital
requirements. It’s less common due to a higher risk.
New rules from 2025 require insurers to assess bond
risk based on cash flow predictability and credit
enhancements.
64
Regulated by ERISA: Must invest prudently and in the beneficiaries’
best interest
- No fixed cap on corporate bonds, but they must be diversified.
65
- Can invest in
66
:
• Investment-grade bonds (most preferred)
• High-yield (junk) bonds—allowed but riskier, needs justification
• Private credit and long-duration bonds—okay if vetted properly
67
• Speculative or illiquid bonds generally discouraged
- Goal is to match liabilities while managing risk, often through
liability-driven investing strategies.
European Union
Under Solvency II:
- Can invest in investment-grade, hybrid, and private
placements.
68
- High-yield bonds are allowed but need more capital.
- Speculative or concentrated bets are discouraged.
- Capital charges rise with risk, duration, and rating
69
Under IORP II, investments must be prudent, diversified, and mostly
on regulated markets.
- Investment-grade, private placements, long-duration bonds
allowed (OECD,2025)
- High-yield bonds are permitted with strong risk controls.
- Speculative or illiquid bonds are generally discouraged.
- No EU-wide cap, but some countries impose limits.
70
Example: In Poland, statutory pension schemes are restricted to
investing only 5% of their assets in foreign securities, which affects
diversification.
71
63 Michele Wong, Asset Mix YE 2024, NAIC Capital Markets Bureau Special Report (1 May 2025)
64 National Association of Insurance Commissioners, 2025 Principles-Based Bond Project: Guidance and Implementation Overview
65 OECD, Annual Survey of Investment Regulation of Pension Funds and Other Pension Providers: 2022 Edition
66 Pension Benefit Guaranty Corporation, Investment Policy Statement: August 2023 (PBGC, August 2023)
67 Fang Cai and Sharjil Haque, Private Credit: Characteristics and Risks, FEDS Notes (Washington: Board of Governors of the Federal Reserve System, 23 February 2024),
68 European Union, Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the Taking-up and Pursuit of the Business of Insurance and Reinsurance
(Solvency II), Article 132: Prudent Person Principle, Official Journal of the Europ ean Union, L335/1–L335/155, 2009
69 European Union, Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 Supplementing Directive 2009/138/EC of the European Parliament and of the Council (Solvency II),
Article 176: Spread Risk on Bonds and Loans, Official Journal of the European Union, L12/1–L12/226, 2015
70 European Union, Directive 2016/2341/EU of the European Parliament and of the Council of 14 December 2016 on the Activities and Supervision of Institutions for Occupational Retirement
Provision (IORP II): Investment Rules, Official Journal of the European Union, L 354/37–L 354/75, 2016
71 Poland, Act of 28 August 1997 on the Organization and Operation of Pension Funds, Article 143, Journal of Laws of the Republic of Poland, 1997, No. 139, item 934 44CORPORATE BOND MARKETCORPORATE BOND MARKET
JurisdictionInsurance CompaniesPension Funds
India
Under IRDAI
72
- Issuer Ratings: Only investment-grade bonds are usually
allowed. Lower-rated or unrated bonds are restricted or
require approval.
- Exposure Limit: Typically, 10-15% of total investment
assets for a group of companies.
- Types of Instruments: Mainly listed corporate bonds,
non-convertible debentures, and infrastructure bonds.
Convertible debentures are generally not allowed.
- Other Rules: Portfolio must be diversified; investments
in structured products have limits; regular rating reviews
required.
Scheme C – PFRDA (NPS): Summary
73
,
74
- Instruments: Invests in listed corporate bonds (≥3 yrs maturity),
bank FDs, PSU/infrastructure/municipal bonds, and debt mutual
funds.
- Ratings: High allocations in investment-grade; max 10% in A to AA–
rated.
- Limits: Industry cap – 15% of AUM; issuer cap – 5–10%; money
market – max 5%; equity – up to 15% (Tier-II).
Non-NPS Pension Funds – Key Corporate Bond Rules (PFRDA):
- High-rated bonds (min AA, rated by 2 agencies); no unlisted or
below-AA instruments allowed.
- Exposure limits: Sector and issuer-specific limits.
- Strict governance: Funds must meet PMLA norms, have oversight
committees, and act on downgrades.
China
- CBIRC Bond Investment Rules for Insurers
- Rating-Based Caps:
• For BBB-rated or lower bonds, insurers can invest up
to 10% of a single bond issuance.
75
• Holdings from the same issuer must not exceed 20%
of the issuer’s audited net assets from the previous
fiscal year.
76
- Solvency Ratio-Based Permissions:
• 200%+ solvency ratio: Rating requirements may be
waived if the insurer or trustee has strong credit risk
management.
• 120%–200%: Bonds must be rated BBB or higher by
Chinese credit rating agencies.
• Below 120% / under regulatory scrutiny: Only AA or
higher-rated bonds allowed; issuers must have at least
an A rating.
77
- China Pension Fund Norms (NSSF)
- Issuer Type: Investments allowed in SOEs, private firms, and
financial institutions—preferably government-backed.
78
- Minimum Ratings: Bonds must be A rated or above (stricter than
BBB-)
79
- Exposure Caps:
• Corporate bonds: ≤ 10% of total assets
• Per issuer: ≤ 5% of total assets (world Bank, 2014)
72 Insurance Regulatory and Development Authority of India (IRDAI), Insurance Regulatory and Development Authority (Investment) Regulations, Fifth Amendment, 2013, Gazette of India, 2013
73 Pension Fund Regulatory and Development Authority (PFRDA), Master Circular on Investment Guidelines for NPS Tier-I & Tier-II, 28 March 28 2025
74 Pension Fund Regulatory and Development Authority (PFRDA), Master Circular on Investment Guidelines for NPS/APY Schemes – Central Government, State Government, Corporate
CG, NPS Lite, Atal Pension Yojana (APY), and APY Fund Scheme, 21 August 2025
75 Xinhua Silk Road, “CBIRC Caps Insurers’ Investment in BBB or Lower-Rated Corporate Bonds at a Maximum of 10% of Issuance,” Xinhua Silk Road
76 China Banking and Insurance Regulatory Commission (CBIRC), CBIRC Office [2021] No. 118
77 Jincheng Tongda & Neal Law Firm (JT&N), “PRC Insurance Highlights News Alert (January 2022),” JT&N, January 2022
78 Wikipedia contributors, “National Council for Social Security Fund,” Wikipedia, The Free Encyclopedia, last modified August 1, 2023
79 National Council for Social Security Fund, [Interim Measures for the Investment Management of the National Social Security Fund], 14 December 2021 45CORPORATE BOND MARKETCORPORATE BOND MARKET
JurisdictionInsurance CompaniesPension Funds
Brazil
Regulated by SUSEP under conservative rules.
-Can invest in: Investment-grade, private placements,
infrastructure bonds (e.g., Law 12.431).
80
-High-yield bonds: Allowed with strict risk, liquidity, and
capital safeguards.
-Speculative or illiquid bonds: Discouraged unless part of a
diversified, approved strategy.
-Must avoid concentration risk and meet RBC
requirements
81
Regulated by PREVIC and CMN to ensure safety, diversification &
long-term solvency
Allowed Bonds
Can invest in BBB- rated or higher corporate and infrastructure
bonds (CVM 400/476)
82
Non-investment-grade allowed sparingly; unrated bonds discourage
Limits
30% max per issuer or group.
An additional 10% cap on bonds from the sponsoring employer.
Corporate bonds fall under the 80% cap on total fixed-income assets
(excl. government bonds).
83
Thailand
Corporate bonds rated A and above are widely accepted
-Bonds rated BBB or below are capped at 15% of total
assets
-Investments in corporate bonds, syndicated loans, leasing,
guarantees, and similar instruments are combined and
capped at 30% of total assets
84
-Credit ratings are required for public offerings but
optional for private placements
-Risk and liquidity assessments guide limits for unrated and
other instruments
-All rules align with Thailand’s Risk-Based Capital (RBC II)
framework under OIC regulation
85
Pension funds can invest in rated corporate bonds (A and above)
BBB-rated bonds are allowed in small amounts
Unrated or junk bonds are not allowed (Social Security Office [SSO]
of Thailand, 2011)
At least 60% of assets must be in high-security instruments (e.g.,
govt bonds, IG corporate bonds).
86
Regulated under RBC II by OIC/SS
80 Brasil, Lei nº 12.431, de 24 de junho de 2011, Diário Oficial da União, Br asília, DF, 24 june 2011
81 Basel Committee on Banking Supervision, The Basel Framework: Chapter RBC20 – Calculation of minimum risk-based capital requirements, Bank for International Settlements, November
26, 2020
82 Antonio Gledson de Carvalho and Felipe Tumenas Marques, “The Microstructure of the Brazilian Market for Corporate Bonds,” Revista Brasileira de Gestão de Negócios 22, no. 1 (2020):
482–500
83 “New Rules For Investments Of Brazilian Pension Plans,” vLex, accessed 11 September 2025
84 Tilleke & Gibbins, “COUNTRY UPDATE – Thailand: Insurance,” Tilleke & Gibbins, January 2024
85 Office of Insurance Commission (OIC), Notification of the Insurance Commission Re: Classification and Type of Capital as well as Criteria, Procedures, and Conditions for Computation of
Non-life Insurance Companies’ Capital Requirements B.E. 2562 (2019), issued 23 November 2019
86 Social Security Office (SSO) of Thailand, Management of the Social Security Fund of Thailand, ASEAN Social Security Association, 2011 46CORPORATE BOND MARKETCORPORATE BOND MARKET
Section 5
Reforms and Policies Undertaken
Towards Strengthening India’s
Corporate Bond Market 47CORPORATE BOND MARKETCORPORATE BOND MARKET
5. Reforms and Policies Undertaken Towards Strengthening
India’s Corporate Bond Market
This section covers the key policy and regulatory initiatives shaping India’s corporate bond
market, led by SEBI, the RBI, and the Government of India. It outlines reforms undertaken
to build a strong foundation to enhance transparency, strengthen governance, improve
infrastructure, and promote sustainable finance, alongside measures to deepen liquidity,
broaden investor participation, and streamline issuance and trading.
5.1 Reforms by SEBI to deepen the Corporate Bond Market: As the principal
regulator for securities markets, the SEBI has implemented several reforms to
strengthen the corporate bond ecosystem. These measures focus on improving
market transparency, enhancing disclosure standards, facilitating bond issuance
and trading platforms, and broadening the investor base. Together, these initiatives
aim to build investor confidence and foster a vibrant, well-regulated corporate bond
market in India.
Focus AreaKey Initiatives
5.1.1 Enhancing
Transparency
and
Governance
1. Issue and Listing of Debt Securities Regulations, 2008
2. Listing Obligations and Disclosure Requirements Regulations, 2015
3. Strengthening the regulations for Credit Rating Agencies, 2019
4. Enhancing Disclosure Norms, 2023
5. Regulations focused on Debenture Trustees (2020–2022)
6. Once Listed, Always Listed (2023)- Reform to Enhance Transparency
5.1.2 Liquidity,
Efficiency
& Market
Participation
1. Request for Quote Mechanism (RFQ) -Electronification of Secondary
Corporate Bond Trading 2020
2. Revamped Information Repository of Listed Bonds, 2021 – The Centralised
Bond Database
3. A single document for tapping the bond markets, 2021
4. Reducing the minimum face value of debt securities to encourage retail
participation, 2022 & 2024
5. Framework for Online Bond Platforms, 2022
6. Capping of International Securities Identification Number (ISIN) Limit for
Issuers for consolidation and reducing fragmentation, 2023
7. Reduced Listing Fees, Oct 2023
8. Liquidity Window Facility, Oct 2024
5.1.3 Market
Infrastructure
for Issuance
and Trading
1. Trade Reporting Platform, 2007
2. Electronic Book Provider (EBP) Platform, 2016
3. AMC Repo Clearing Limited (ARCL), 2021
4. National Securities Depository Limited’s (NSDL) Blockchain-Based DLT
Platform, 2022
5. Framework for Debt IPOs, 2023
6. Revised Settlement Cycle, 2024
5.1.4 Green
Finance and
Sustainability
1. Guidelines for the issuance of Green Bonds, 2017, 2023
2. Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts
(REITs), 2024 48CORPORATE BOND MARKETCORPORATE BOND MARKET
5.1.1 Measures to Enhance Transparency and Governance
(i) Issue and Listing of Debt Securities Regulations, 2008:
yDisclosure Requirements: Issuers must provide detailed information
about their financial position, business operations, and associated risks.
yRating Criteria: Corporate bonds in India must be rated by registered
credit rating agencies, with periodic reviews to reflect the current
creditworthiness of the issuer.
yListing Norms: Bonds must be listed on recognised stock exchanges to
facilitate trading.
(ii) Listing Obligations and Disclosure Requirements Regulations, 2015: The
regulations introduced stricter corporate governance and transparency
norms, including requirements for independent directors, board composition,
related party transactions, standardised formats for financial reporting and
disclosures to ensure consistency and comparability across companies and
established mechanisms for monitoring compliance with the regulations,
including the appointment of compliance officers and regular audits.
(iii) Strengthening the regulations for CRAs, 2019: CRA regulation in India began
with SEBI’s 1999 regulations, later strengthened through amendments,
including 2019 reforms that enhanced transparency, governance, risk
management, and internal controls. The SEBI circular dated 15 May 2025
officially permits CRAs to apply the Expected Loss (EL) based rating scale
to municipal bonds issued for infrastructure financing, alongside traditional
Probability of Default (PD) ratings, offering a more comprehensive view of
credit risk and recovery prospects.
(iv) Enhancing Disclosure Norms, 2023: SEBI introduced the Second Amendment
to the SEBI (Listing Obligations and Disclosure Requirements) Regulations,
2015, following the first amendment in 2021, aimed at enhancing transparency
and accountability among listed companies by strengthening their disclosure
requirements. It included provisions to improve the quality, timeliness, and
standardisation of disclosures related to financial performance, corporate
governance, material events, and other information critical to investor decision-
making.
(v) Regulations focused on Debenture Trustees (DTs) (2020–2022): Between
2020 and 2022, SEBI introduced reforms to strengthen DTs, enhance
disclosures, and align listing norms. The 2020 amendment clarified DT roles,
requiring independent due diligence and continuous monitoring, supported
by detailed circulars. The Nov 2020 circular prescribed procedures for asset
verification and due diligence, while the Oct 2020 circular mandated that
issuers create a Recovery Expense Fund (REF) to facilitate enforcement
in the event of default. To improve consistency and transparency, SEBI
introduced a standardised format for asset cover certificates and covenant 49CORPORATE BOND MARKETCORPORATE BOND MARKET
monitoring in March 2021. Further, a May 2022 circular required DTs to
monitor the status of charge creation and report any encumbrances, with
enhanced disclosure obligations under the Debenture Trustee Agreement.
(vi) “Once Listed, Always Listed (2023)”- Reform to Enhance Transparency:
SEBI introduced provisions requiring listed issuers with outstanding non-
convertible debt securities (as on 31 December 2023), also to list all their
subsequent issuances of such securities on the stock exchange(s). They are
aimed at facilitating transparency in price discovery, better disclosures to
investors and the market, and avoiding ISIN-level confusion and possible
mis-selling of unlisted bonds.
5.1.2 Reforms for Improved Liquidity, Efficiency & Market Participation
(i) Request for Quote Mechanism (RFQ)- Electronification of Secondary
Corporate Bond Trading 2020: The platform aims to shift corporate bond
trading from traditional Over the Counter (OTC) methods to electronic trading.
Within four years, it has rapidly gained traction, with nearly 30% of corporate
bond trading occurring on the platform. Initially driven by a regulatory push,
the platform now supports various debt securities, including corporate bonds,
CP, CD, G-sec, SDL, and T-bills. Initially, the RFQ platform only allowed access
to institutional participants, including all regulated entities, listed corporate and
Institutional Investors. With SEBI’s Jan 2023 circular, all types of participants,
including retail, are now allowed to access the RFQ Platform by using the
services of members of the debt segment. Offering flexibility, it enables
anonymous or disclosed quotes, fixed/negotiable deal terms, and minimum
fill parameters. In FY 2024, it saw strong traction with corporate bonds
representing ~26% of total trading (rising from 22% in Q1 to 29% in Q4). In
value terms, the RFQ Platform represents the daily average trading of Rs. 3246
crores covering all debt instruments across exchanges in FY 2024, with NSE’s
market share standing at 95%. Currently, over 700 participants are active on
the NSE RFQ Platform. In May 2025, SEBI introduced some key enhancements,
such as the standardisation of yield-to-price conversions based on scheduled
cash flows and mandatory upfront disclosures of bond cash flow schedules
into the centralised corporate bond database
87
.
Table 5.1: Participants Mandated by Regulators to transact on RFQ
Regulatory Guidance
Minimum % of Bond Trading in
RFQ*
Mutual Funds25%
Insurance10%
PMS10%
AIF10%
FPI10%
Brokers (Prop only)25%
Source: SEBI
87 SEBI | Simplification of operational process and clarifying regarding the cash flow disclosure in Corporate Bond Database
pursuant to review of Request for Quote (RFQ) Platform framework. 50CORPORATE BOND MARKETCORPORATE BOND MARKET
(ii) Revamped Information Repository of Listed Bonds, 2021 – The Centralised
Bond Database: SEBI has established a Centralised Bond Database
to consolidate all the listed bond information in one place. Hosted by
depositories and publicly accessible, it includes standardised data fields and
filing requirements to improve transparency and investor access.
(iii) A single document for tapping the bond markets, 2021: To simplify the
process for issuers of non-convertible securities and Commercial Papers
seeking to list on the bond markets, SEBI has introduced the concept of the
GID (General Information Document) and KID (Key Information Document)
for initial and subsequent issuances (within 1 year), respectively. These
standardised templates aim to simplify issuer disclosures, reduce redundancy,
and enhance investor comprehension. These formats were implemented on
a “comply or explain” basis until March 31, 2024, and became mandatory
thereafter. Additionally, SEBI has facilitated shelf registration for frequent
issuers, allowing them to file a single disclosure document for multiple debt
issuances over over 12 months.
OECD, 2024 -Corporate Bond Markets in Asia: Challenges and Opportunities for Growth
Companies” also highlights the need for the development of standardised templates for
corporate bond terms to enhance comparability, reduce execution time, and support access
for growth companies.
(iv) Reducing the minimum face value of debt securities to encourage retail
participation, 2022 & 2024: In Oct 2022, the SEBI reduced the face value of
each debt security or non-convertible redeemable preference share issued
(on private placement basis or issued on private placement basis and traded
on a stock exchange) to Rs 1 lakh from Rs 10 lakh. The Rs 1 lakh limit was
further reduced to `10,000 in 2024. It aims to attract more participation
from retail and non-institutional investors who were previously restricted by
the high face value.
(v) Framework for Online Bond Platforms, 2022: In response to the increasing
involvement of fintech and traditional debt brokers in reaching out to retail
investors for corporate bond investments, this initiative recognised the significant
potential of Online Bond Platform Providers (OBPPs) laid the groundwork for
future growth. The reform formalised digital bond investing, mandating all
platforms to register as stockbrokers and comply with norms on transparency,
investor protection, KYC, and grievance redressal. Under the framework,
OBPPs are required to route all transactions through the stock exchanges’ RFQ
Platforms. Backed by SEBI regulations, these platforms enable a wider range
of investors, including retail, HNIs, and institutions. Platforms like IndiaBonds
provide transparency and quick access to bonds including retail participation.
88

Some of the other leading OBPPs in India include Jiraaf, GoldenPi, Wint Wealth,
BondsIndia, TheFixedIncome.com, and exchange-backed platforms like NSE
and BSE Bond Platforms.
88 Gupta, Anshul. 2023. “Increasing Retail Investor Participation in Corporate Bonds: The Case for a Smaller Ticket Size.” Mint, October
8, 2023. 51CORPORATE BOND MARKETCORPORATE BOND MARKET
(vi) Capping of ISIN Limit for Issuers for consolidation and reducing
fragmentation, 2023: The presence of numerous ISINs for the same issuer
leads to fragmented liquidity and hinders efficient price discovery. To
address this, SEBI limited issuers to a maximum of 14 ISINs maturing in a
single financial year—9 for plain vanilla instruments (tenors ≤ 5 years) and 5
for structured instruments (tenors > 5 years). This measure aims to reduce
primary market fragmentation, enhance secondary market liquidity, lower
trading costs, and improve buyer-seller matching.
(vii) Reduced Listing Fees, Oct 2023: SEBI reduced listing fees for debt securities
to encourage more companies to list their bonds. This move aims to lower
issuance costs, making it more attractive for companies to raise funds
through the bond market.
The corporate bond issuance and listing fees vary across markets. The OECD
report (2024) has compiled the listing fee across selected jurisdictions as
follows
.
Table 5.2: Listing Fees in various Jurisdictions
Jurisdiction
Principle: USD 10 mnPrinciple: USD 50 mn
Initial
Listing
Fee
Annual
Listing
Fee
Total (5
Years)
As % of
Amount
Issued
Initial
Listing
Fee
Annual
Listing
Fee
Total (5
Years)
As % of
Amount
Issued
Australia
62,594 20,923 167,210 1.67% 103,228 30,281 254,631 2.55%
China 1,000 148 1,742 0.02% 2,969 250 4,219 0.04%
Hong Kong
(China)
2,554 – 2,554 0.03% 3,192 – 3,192 0.03%
India 636 3,817 19,719 0.20% 636 4,834 24,808 0.25%
Indonesia 1,684 2,500 14,184 0.14% 1,684 10,000 56,684 0.57%
Japan 7,605 760 11,407 0.11% 7,605 760 11,407 0.11%
Korea 774 77 1,161 0.01% 1,084 77 1,471 0.01%
Malaysia 3,408 – 3,408 0.03% 3,408 – 3,408 0.03%
Philippines 5,918 – 5,918 0.06% 25,918 – 25,918 0.26%
Singapore 18,133 – 18,133 0.18% 18,133 – 18,133 0.18%
Chinese Taipei – 3,000 15,000 0.15% – 15,000 75,000 0.75%
Source: OECD Compilation
Note: Corporate bonds are presumed to be listed under the Standards/Regulations of each market, with an assumed
maturity of five years.
As shown in Table 5.2, listing fees in India are notably higher than those
in China, Korea, and Malaysia, where listing fees for corporate bonds are
negligible (ranging from 0.01–0.04% of the issuance amount). Other issuance-
related costs also include legal, registrar, consultancy and distribution fees.
Higher issuance costs can discourage wider participation in the bond market,
particularly by mid-sized companies. 52CORPORATE BOND MARKETCORPORATE BOND MARKET
(viii) Liquidity Window Facility, Oct 2024: SEBI introduced an optional liquidity
window mechanism aimed at improving secondary market liquidity. Under
this mechanism, the issuer may act as a temporary buyer of its own bonds in
the secondary market, offering scheduled buybacks to provide investors with
an exit option. While this is not a formal put option, it enables bonds to be
resold through stock exchanges, RFQ platforms, or online bond portals, with
the possibility of extinguishment if resale fails. The issuer can choose whether
to extend this facility to all investors or only to retail investors.
5.1.3 Reforms for improved Market Infrastructure for Issuance and Trading:
(i) Trade Reporting Platform, 2007: The Corporate Bond Reporting and Integrated
Clearing System (CBRICS), is a platform developed by SEBI and operated by the
NSDL. Its primary objective is to enhance transparency, streamline reporting, and
facilitate the efficient clearing and settlement of corporate bond transactions
in India. By providing a centralised system for transaction reporting, CBRICS
aims to improve market efficiency and strengthen the integrity of the corporate
bond market.
(ii) Electronic Book Provider (EBP) Platform, 2016: The Electronic Book Provider
(EBP) platform, developed by SEBI to bring transparency to the primary
corporate bond market, was mandated in 2016 for private placements of
₹500 crore and above (including green shoe options). Many issuers are even
below this threshold adopted it voluntarily, leading SEBI to successively
reduce the limit to ₹200 crore in 2018, ₹100 crore in 2021, and further to
₹50 crore in 2022. Subsequent amendments improved the bookbuilding
process by prioritising the best bid over the fastest bid, capping green shoe
options, and increasing the arranger bid limits. 16 May 2025 circular further
strengthened efficiency and transparency by mandating the platform
for private placements of debt securities, Non-Convertible Redeemable
Preference Shares (NCRPS), and municipal bonds with issue sizes of ₹20
crore or more, while also enabling access to REITs, InvITs, CPs, and CDs,
enhancing disclosure standards, real-time bidding visibility, and audit trails,
collectively deepening market participation and capital-raising efficiency.
(iii) AMC Repo Clearing Limited (ARCL), a Limited Purpose Clearing Corporation
(LPCC) 2021: Under SEBI’s guidance, mutual funds managing debt AUM
set up ARCL as the first Limited Purpose Clearing Corporation (LPCC) in
January 2022 to deepen the corporate bond repo market. ARCL is a Central
Counter Party (CCP) offering clearing and settlement services to all trades
executed on NSE and BSE under triparty repo in corporate debt securities
with robust risk management along with guarantee mechanism.
89
It facilitates
tri-party repo transactions in corporate bonds with settlement guarantees,
89 AMC Repo Clearing Limited. 2025. “About ARCL.” Accessed Septembe r 11, 2025. 53CORPORATE BOND MARKETCORPORATE BOND MARKET
reducing counterparty risk and enabling short-term funding without selling
underlying bonds. In May 2023, SEBI proposed allowing direct participation
by entities like NBFCs and mutual funds, expanding access.
Source: ARCL * Launched on July 28, 2023
As per Fig. 15, the platform’s daily average trading value rose from ~Rs. 681
crores in Mar’2024 to Rs. 1821 crores in Feb, 2025.
Setting up the Limited Purpose Repo Clearing Corporation with triparty
repo services and the central counterparty services of ARCL in the bond
market is expected to improve efficiency in collateral and settlement for
its members, thereby widening and deepening the corporate bond repo
market. This institution will serve manifold purposes such as allowing market
makers to access cost-effective funding for their inventory, holders of bonds
to meet their short-term liquidity needs without having to liquidate their
assets and the opportunity for entities with short-term surpluses to deploy
their funds safely and efficiently.
90
(iv) NSDL’s Blockchain-Based Distributed Ledger Technology (DLT)
Platform, 2022
91
: NSDL’s DLT platform brings discipline, transparency, and
standardisation to the corporate bond market by providing a tamper-proof
audit trail of transactions between issuers and debenture trustees. Designed
to protect investor interests, the platform monitors asset cover and covenant
compliance for secured debentures, prevents multiple charges on the same
asset, and ensures accurate ISIN-to-asset mapping. With over 4,200 issuers
and 6,300 secured ISINs onboarded as of 2024, the platform strengthens
due diligence, reduces reconciliation issues, and enhances governance
throughout the lifecycle.
90 Press Information Bureau. 2023. “Union Finance Minister Smt. Nirmala Sitharaman Launches the AMC Repo Clearing Limited
(ARCL) and Corporate Debt Market Development Fund (CDMDF).” Press I nformation Bureau, July 28, 2023.
91 Cognizant. 2025. “NSDL’s New Blockchain Platform Protects Bond Investors.” Cognizant.
Fig. 15: ARCL Tri-party Repo Trade Volume 54CORPORATE BOND MARKETCORPORATE BOND MARKET
(v) Framework for Debt IPOs, 2023: In 2023, SEBI introduced a framework for
debt IPOs, enabling companies to raise funds through public bond offerings.
The framework streamlines the debt issuance process, making it easier for
companies to tap into capital markets. A designated monitoring agency
oversees the use of proceeds to ensure alignment with stated objectives,
while safeguards protect investor interests, including restrictions on using
proceeds for promoter loans.
(vi) Revised Settlement Cycle, 2024: SEBI has revised the settlement cycle for
trades in corporate bonds to T+1 (transaction date plus one day) to improve
efficiency and reduce settlement and counterparty risk.
5.1.4 Reforms contributing to Green Finance and Sustainability
(i) Guidelines for the issuance of Green Bonds, 2017, 2023
92
,
93
: SEBI issued
green bond guidelines in 2017, and in 2023, the government developed
its Framework for Sovereign Green Bonds, both of which are consistent with
the International Capital Market Association (ICMA) international guidelines.
The 2023 guidelines require issuers to obtain an external review or certification
from an accredited third-party reviewers to verify the environmental benefits
of their projects. These regulations align with the updated Green Bond
Principles (GBP) recognised by the International Organisation of Securities
Commissions (IOSCO) and help combat greenwashing, promote sustainable
investment practices, and attract environmentally conscious investors. The
RBI also recently opened the door for foreign investment in sovereign green
bonds. In May 2021 circular, SEBI introduced the Business Responsibility and
Sustainability Report (BRSR)
94
, replacing the earlier Business Responsibility
Report for the top 1,000 listed companies. SEBI in 2023 provided the BRSR
Core framework for assurance and ESG disclosures, introducing stricter ESG
disclosure requirements, mandatory assurance, and value chain reporting,
enhancing transparency, accountability, and investor confidence in corporate
sustainability efforts.
Green bond issuances in India have been on an upward trend in the past decade,
reaching US$21 billion in 2023 from US$1.2 billion (Rs 1,000 crore) in 2013
95
, of which
the private sector was responsible for 84% issuances. Green bond investments
are being made in developing energy-efficient projects and technologies across
a variety of sectors. India’s green bonds represented 2.2% of global issuances in
2023, suggesting a large scope for enhancement.
92 Deora, Naisha. 2024. “Green Bonds: Financing the Renewable Era.” Observer Research Foundation, October 8, 2024. a
93 Singh, Uday Veer, and Manish Kumar Shrivastava. 2024. Accelerating the Growth of Green Bonds in India. New Delhi: The En-
ergy and Resources Institute.
94 The BRSR aligns sustainability reporting with financial reporting standards and is based on the National Guidelines on Respon-
sible Business Conduct (RBC Guidelines). These guidelines incorporate international frameworks such as the UN Sustainable
Development Goals (SDGs), Paris Agreement, and ILO Core Conventions. The principles cover business ethics, human rights,
environmental safety, and fair labor practices.
95 India Brand Equity Foundation (IBEF). 2025. “The Growth of Green Finance and Its Impact on India’s Sustainable Develop-
ment.” IBEF, March 27, 2025. 55CORPORATE BOND MARKETCORPORATE BOND MARKET
Table 5.3: Milestone Issuances of Green Bonds in India
Issuer MilestoneYear
Amount
(Million)
YES Bank First green bond issuance in India. 2015 USD 260
Greenko
First high-yield green bond issuance in India.
Greenko is also the highest cumulative issuer
of green bonds in India.
2016 USD 500
NTPCIssuance of a corporate green ‘Masala’ bond. 2016 USD 300
Ghaziabad
Municipal
Corporation
First local civic body in India to issue a green
bond (The Hindu Business Line, 2021).
2021 USD 20
Indore Municipal
Corporation
First city to enlist municipal green bonds on
the National Stock Exchange’s (NSE) debt
securities platform (Vats, 2023).
2023 USD 87
GoI
First sovereign bond in two tranches of 5 &
10-year tenors.
2023 USD 1000
Source: TERI
Capital Convertibility Constraints and Evolving Structures for Sovereign Green
Bonds (SGrB): India’s SGrB issuances face shallow secondary markets, low liquidity,
higher credit spreads, and elevated currency hedging costs, factors influenced in
part by India’s sovereign credit rating. In 2024, the RBI permitted select foreign
investors to access SGrBs via GIFT City’s IFSC, signalling initial steps toward capital
account flexibility. However, full convertibility and hedge-free repatriation remain
constrained under FEMA, as SGrBs are excluded from the Fully Accessible Route
(FAR). To overcome these barriers, policymakers are considering issuing SGrBs in
hard currencies like the USD, enabling offshore issuance and settlement. This could
mitigate currency risk and boost foreign investor participation. While GIFT City
marks early progress, India’s green bond market is still evolving toward broader
capital account liberalisation, crucial for mobilising global capital.
(ii) Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts
(REITs), 2024: SEBI has implemented regulations to support the listing and
trading of InvITs and REITs, which aim to enhance transparency, safeguard
investor interests, and foster market development. In 2024, SEBI introduced
key amendments, including provisions allowing privately placed InvITs to
issue subordinate units to sponsors upon the acquisition of infrastructure
projects. Additionally, SEBI’s 2024 amendments facilitate the growth of
Small and Medium REITs (SM REITs), streamlining their registration process
and setting new eligibility criteria. These changes are designed to create
a more robust, transparent, and accessible market for InvITs and REITs,
making it easier for investors to participate in infrastructure and real estate
investments. 56CORPORATE BOND MARKETCORPORATE BOND MARKET
5.2 Measures by the RBI to develop the Corporate Bond Market: Along with SEBI,
the RBI serves as a key regulator in developing and strengthening India’s corporate
bond market. The RBI has undertaken a series of measures to enhance liquidity,
expand investor participation, and promote the use of risk mitigation tools. These
initiatives collectively aim to make the corporate bond market deeper, more
transparent, and resilient.
Focus AreaKey Initiatives
5.2.1 Liquidity
Enhancement
Measures
1. Bilateral Repos (2011)
2. Partial Credit Enhancement (PCE), 2015
3. Repo in Corporate Debt Securities, 2016
4. Tri-Party Repo on Corporate Bonds, 2018
5. Retail Direct platform in Nov, 2021
6. Liquidity Management through Open Market Operations (OMOs) and
other measures
5.2.2 Market
Development and
Participation
1. Mandatory Market Borrowing Framework, 2018
2. Voluntary Retention Route (VRR) for Foreign Portfolio Investment
(FPI), 2019
3. Removal of Held-To-Maturity (HTM) Cap, 2024
5.2.3 Development of
Risk Mitigation tools
1. New CDS Guidelines by RBI, 2022
5.2.1 Liquidity Enhancement Measures
(i) Bilateral Repos (2011): RBI introduced Bilateral Repos to boost liquidity and
turnover in the corporate bond market by allowing bonds to be temporarily
exchanged for cash. This would provide investors with a way to monetise their
bond holdings without needing to sell the bonds outright, thus improving
the liquidity. The framework laid the foundation for repo in corporate debt,
focusing on legal clarity and basic eligibility. However, the initiative had
limited impact, with average daily turnover remaining flat and the market
staying shallow, highlighting challenges such as low investor participation,
shallow market depth, and operational barriers.
(ii) Partial Credit Enhancement (PCE)
96
, 2015: PCE is a financial mechanism
designed to reduce risk, where a third party offers limited financial support to
enhance the credit rating of a debt instrument. PCE is structured as a non-funded,
irrevocable contingent line of credit and the facility can be drawn upon in the
event of cash flow shortfalls affecting bond servicing. This move is anticipated
to be transformative for both investors and issuers, especially NBFCs and mid-
sized corporations, which often face difficulties securing affordable debt. PCE
can be provided only to bonds with a pre-enhanced rating of BBB- or higher.
PCE can elevate bond ratings, facilitating access to the bond market for lower-
rated corporates by committing additional credit support if needed, without
disbursing funds unless there is a default. For NBFCs and HFCs, the bonds
eligible for PCE must have a minimum tenor of three years, ensuring that the
enhanced credit support is directed towards longer-term financing needs.
96 Refer Exhibit 1 under Section 5 of Appendix for more details on PCE 57CORPORATE BOND MARKETCORPORATE BOND MARKET
Stringent capital requirements and restrictions (e.g., limits on the proportion of PCE
support a single bank can provide) have constrained the scope and commercial
viability of PCE. The bank providing PCE does not hold capital based only on its
PCE amount. Instead, it calculates the capital based on the difference between the
capital required before credit enhancement and the capital required after credit
enhancement (as per the applicable risk weights for claims on corporates). This
requires the PCE provider to maintain huge regulatory capital for a significantly
long period of time; which also gets reflected in the ultimate cost to the beneficiary.
The aggregate PCE provided by all banks for a given bond issue was revised to
50% of the bond issue size in 2016 (initially set at 20%), with a limit of up to 20%
of the bond issue size for an individual bank. This enhancement is expected to
facilitate companies’ access to bond markets at more competitive rates, particularly
benefiting infrastructure projects. The RBI has also proposed a substantial
reduction in the capital that regulated entities need to set aside when providing
PCE. This change aims to make PCE-backed instruments more attractive and viable
compared to traditional bank loans. Furthermore, issuers are now permitted to use
the funds raised through PCE-backed bonds to repay existing bank loans, providing
companies with greater flexibility in managing their debt and potentially freeing up
bank limits for new projects.
(iii) Repo in Corporate Debt Securities, 2016: In 2016, the RBI expanded
access to repo transactions in corporate debt securities. The RBI amended
its directions to allow brokers registered with the SEBI and authorised as
market makers to engage in repo and reverse repo contracts involving
corporate debt securities.
97
Prior to this change, such transactions were
primarily limited to banks and select financial institutions. Increased liquidity
was reflected in the higher average daily volumes for corporate debt repo
transactions.
Fig 16 shows that after peaking in 2021, the average daily repo turnover in
the corporate bond market declined over the next two years, which could
have been due to RBI’s liquidity tightening, rising interest rates, and a shift
back to safer government bond repos, before picking up again in 2024.
Source: RBI
97 Reserve Bank of India. 2016. “Repo in Corporate Debt Securities (Amendment) Directions, 2016.” Reserve Bank of India. 58CORPORATE BOND MARKETCORPORATE BOND MARKET
(iv) Tri-Party Repo on Corporate Bonds, 2018: The aim of introducing Tri-Party
repo was to improve liquidity in the corporate bond repo market, thereby
providing an alternative to Government securities repo.
98
This allows a third-
party agent to facilitate repo transactions by managing collateral selection,
payments and settlements, and custody throughout the transaction. Repos
can help lower the cost of market-making by reducing counterparty risk and
documentation burdens typically faced in OTC markets, while also enabling
participants to trade without exchange membership through trading
members—thereby encouraging broader market-making participation in the
secondary market. Despite the establishment of this platform, uptake has
been limited. A SEBI consultation paper from October 2020 attributes this
to the absence of a well-funded Settlement Guarantee Fund (SGF) within
stock exchanges and clearing corporations, which is essential to mitigate
counterparty and credit risks in repo transactions.
99
Subsequently, SEBI
approved the establishment of a Limited Purpose Clearing Corporation
(LPCC) to address the above concerns.
(v) Retail Direct platform in November 2021: In a move to promote financial
inclusion, the RBI launched this platform, which allows retail investors to
invest in government securities like bonds and treasury bills directly. By
opening a Retail Direct Gilt (RDG) account, investors can access secure
investment options without intermediaries, offering a simple, cost-effective
way to diversify their portfolios.
(vi) Liquidity Management through Open Market Operations (OMOs) and other
measures: The RBI employs OMOs, Variable Rate Repo (VRR), and Cash
Reserve Ratio (CRR) adjustments to manage liquidity within the banking
system. These actions help stabilise interest rates and enhance investor
confidence, creating a more favourable and stable environment for the
corporate bond market.
5.2.2 Measures for enhanced Market Development and Participation
(i) Mandatory Market Borrowing Framework, 2018: In Nov 2018, the RBI
issued a circular mandating Large Corporates (LCs) to raise at least 25% of
their incremental borrowings during a financial year (FY) by issuing debt
securities. SEBI received representations from stakeholders (Aug, 2023,
consultation paper), highlighting challenges with the framework. Industries
like textiles highlighted the loss of subsidy benefits as they lose government
interest subsidies when borrowing via debt securities, impacting project
viability. The 25% rule was initially introduced under a “comply or explain”
regime. After the initial phase, the framework evolved in 2023 to offer
greater flexibility, shifting from potential penalties to a system of incentives
98 National Stock Exchange of India. 2023. “About Tri-Party Repo.” National Stock Exchange of India.
99 Securities and Exchange Board of India. 2020. Amendments to the Securities Contracts (Regulation) (Stock Exchanges and Clearing Cor-
porations) Regulations, 2018 and Relevant Circulars to Facilitate Setting Up of a Limited Purpose Repo Clearing Corporation. Oct, 2020. 59CORPORATE BOND MARKETCORPORATE BOND MARKET
and disincentives. The framework now favours incentives like regulatory
ease and reputational benefits over penalties, while applying disincentives
such as increased scrutiny, supporting market-based funding and allowing
flexibility for large issuers.
It was observed that though LCs made efforts to comply with the LC chapter,
around one-third of the identified LCs did not raise the minimum 25% of their
incremental borrowing through issuance of debt securities in FY 2021.
100

SEBI revised the framework, effective Apr 2024. Under the revised framework,
entities with long-term borrowings of ` 1,000 crore (from earlier 100 crore
or more) or more qualify as LCs. SEBI replaced “incremental borrowings”
with “qualified borrowings,” requiring LCs to meet the 25% borrowing
mandate over a three-year block starting FY 2025. Further, SEBI introduced
incentives for LCs that exceed the 25% qualified borrowing requirement,
including reduced annual listing fees (FY T+2) and lower contributions to
the LPCC’s Core Settlement Guarantee Fund (SGF).
(ii) Voluntary Retention Route (VRR) for Foreign Portfolio Investment (FPI),
2019: Under this scheme, FPIs have been given greater operational flexibility
in terms of instrument choices and increased investment caps, besides
exemptions from specific regulatory requirements to undertake long-
term investments in Indian debt markets.
101
The minimum retention period
is three years. In February 2022, the RBI increased the investment limit
under the VRR scheme to ₹2.5 lakh crore from ₹1.5 lakh crore earlier. The
amended VRR is expected to attract long-term, stable FPI investment into
the Indian debt market.
102
India’s inclusion in two major global bond indices,
JPMorgan’s GBI-EM from June 2024 and Bloomberg’s EM Local Currency
Government Index from January 2025, is expected to attract significant
foreign inflows. Increased foreign inflows are expected to support liquidity
in the government bonds, lowering the benchmark curve and reducing
borrowing costs for high-rated corporates.
(iii) Removal of Held-To-Maturity (HTM) Cap, 2024: Effective April 2024, the
RBI removed the 23% cap on banks’ investments in corporate and state
bonds under the HTM category, which was previously applicable mainly to
government securities. This reform enhances banks’ portfolio flexibility and
shields them from mark-to-market volatility, as HTM holdings are exempt
from daily valuation. By allowing corporate bonds in HTM, the RBI aims
to promote greater bank participation, boost demand and liquidity, and
potentially lower corporate borrowing costs by making long-term bond
investments more attractive to banks.
100 Data regarding the details of LCs who were unable to raise 25% of their incremental borrowings through issuance of debt se-
curities for FY 2020, FY 2021 and FY 2022 is provided in Exhibit 2 under Section 5 of Appendix.
101 PHD Chamber of Commerce and Industry. 2022. RBI Introduces the Voluntary Retention Route for Investments by Foreign
Portfolio Investors (FPIs). January 2022
102 Grant Thornton India LLP. [Date of Publication]. RBI Amends Voluntary Retention Route (VRR) for Foreign Portfolio Investors (FPIs). 60CORPORATE BOND MARKETCORPORATE BOND MARKET
Source: NSDL
5.2.3 Measures for developing the Risk Mitigation Tools
(i) New CDS Guidelines by RBI
103
, 2022: The RBI’s 2022 master directions on
Corporate Bond CDS aim to improve credit risk management and promote
India’s corporate bond market. CDS allow participants to redistribute credit
risk, enhance investment opportunities, and reduce transaction costs. The
CDS guidelines allow entities like mutual funds, insurance companies, FPIs,
and AIFs to participate as protection sellers in the market. SEBI’s Sep 2024
circular allows mutual funds to invest in and trade CDS. Earlier, mutual funds
used it primarily to hedge credit risks on corporate bonds. The access for
major players, for both hedging and other purposes, has the potential to
develop the CDS market and improve liquidity in the lower credit space.
5.3 Some specific measures by the GoI and the Ministry of Finance
Additional efforts by the GoI to deepen the bond market, such as improved credit
conditions, may have further accelerated its development. This has been especially
true amidst the pandemic when several stimulus packages and liquidity measures
were undertaken to boost the capital markets. Some of the key development
initiatives are the Corporate Debt Market Development Fund (CDMDF) and the
Voluntary Retention Route (VRR).
5.3.1 Corporate Debt Market Development Fund (CDMDF) & the Guarantee
Scheme for Corporate Debt (GSCD), 2023
To strengthen investor confidence and ensure liquidity during market stress, the
Government of India launched two key initiatives in 2023: the CDMDF and the
GSCD. The CDMDF, registered as an Alternate Investment Fund (AIF) under SEBI,
is a pooled fund with a dedicated mandate to provide emergency liquidity during
financial dislocations. With an initial corpus of ₹3,000 crore contributed by mutual
funds and AMCs, the fund may be expanded as needed. It primarily purchases
investment-grade corporate bonds when mutual funds face heavy redemptions and
are unable to liquidate assets easily. By stepping in during such periods, the CDMDF
helps reduce sudden sell-offs and price volatility, thereby promoting market stability.
103 Refer Exhibit 3 under Section 5 of the Appendix for details on global CDS markets 61CORPORATE BOND MARKETCORPORATE BOND MARKET
Complementing this, the GSCD is a government-backed guarantee scheme designed
to enhance CDMDF’s financial strength. By providing partial guarantees on the fund’s
borrowings, the scheme enables CDMDF to access funding from financial institutions
at reduced risk perception. This backing acts as a safety net for the corporate debt
market, helping to mitigate extreme volatility and systemic risks.
5.3.2 Incentivization of bond issuances under Atal Mission for Rejuvenation and
Urban Transformation (AMRUT) 2.0
104
Driven by India’s rapid urbanisation, the AMRUT 2.0 mission aims to enhance the
quality of life and promote sustainable, inclusive urban development. To strengthen
Urban Local Bodies (ULBs) and expand their access to capital markets, the
Government of India has introduced a structured incentive framework for municipal
bond issuances. ULBs, often constrained by limited revenue and long-term planning
capacity, can now receive grant-in-aid support: ₹13 crore per ₹100 crore raised for
first-time municipal bond issuers (capped at ₹26 crore), and ₹10 crore per ₹100 crore
for second-time green bond issuers (capped at ₹20 crore). A notification issued
by the Ministry of Housing and Urban Affairs on April 7, 2025, further incentivises
pooled issuances, encouraging collaboration among ULBs to enhance scale,
creditworthiness, and investor interest.
5.3.3 IBC, 2016
IBC marked a decisive shift toward a unified and efficient insolvency framework aimed
at improving the health of the financial system and deepening capital markets. By
consolidating multiple fragmented laws, such as SARFAESI, DRT, and Sick Industrial
Companies Act (SICA), and Lok Adalats, into a single, comprehensive statute, the IBC
introduced a time-bound, transparent, and creditor-driven resolution process applicable
to both corporate entities and individuals. Key features such as strict timelines for the
Corporate Insolvency Resolution Process (CIRP), the establishment of the National
Company Law Tribunal (NCLT) and the Insolvency and Bankruptcy Board of India
(IBBI), and the central role of the CoC have streamlined procedures and empowered
financial creditors. Unlike earlier mechanisms, which focused primarily on asset seizure
and liquidation, the IBC emphasises resolution and revival of stressed businesses as
going concerns, preserving jobs and enterprise value. The IBC has contributed to
reducing gross NPAs in banks and improving overall credit discipline. Promoters have
become more cautious about defaults, while lenders are more proactive in initiating
resolution through the CIRP. This behavioural shift has enhanced recovery prospects,
boosted confidence in the financial system, and supported healthier balance sheets in
the banking sector (BIS, 2024).
104 AMRUT 1.0 covered 500 cities, focusing on basic infrastructure and service delivery. AMRUT 2.0, launched in October 2021,
builds on this foundation with broader reforms, including water security, circular economy principles, and financial empower-
ment of ULBs. 62CORPORATE BOND MARKETCORPORATE BOND MARKET
The above policies and reforms have significantly deepened the market, improved
transparency, enhanced investor protection, and strengthened market infrastructure.
Further, by broadening access, these reforms have played a key role in enabling capital
formation for businesses across various sectors in India and supporting economic
growth. However, despite necessary steps forward, several gaps continue to limit the
effectiveness of the current reform landscape.
The debenture trustee framework remains constrained by fragmented regulations and
weak statutory powers, leaving trustees with limited capacity to enforce covenants or
safeguard investors during stress events. Insolvency processes, though strengthened
under the IBC, still suffer from procedural delays, limited adoption of pre-pack
frameworks, and inefficiencies in the functioning of creditor committees, resulting in
slow and uncertain recoveries. These structural frictions undermine investor confidence
and restrict the development of a robust credit risk management ecosystem. The
revised HTM framework has had only a muted impact, with banks showing limited
appetite for corporate bonds due to residual mark-to-market exposure, concentration
in low-yield AAA issuers, and balance-sheet preferences for loan growth. Similarly, the
OTC trade reporting environment remains fragmented across multiple platforms, with
delayed reporting and a lack of real-time price dissemination restricting transparency
and efficient price discovery. Even where reforms have gained traction, such as the RFQ
platform, participation is largely institutional, with retail investors held back by shallow
secondary market liquidity and persistent pricing opacity. Challenges on the issuance
side also weigh heavily on market deepening. High issuance and listing costs deter mid-
sized/ small firms from tapping the market, while overlapping regulatory requirements
across SEBI, RBI, and MCA create compliance burdens that slow down issuances and
discourage new entrants. Liquidity-enhancing measures like capped ISIN issuance or
the proposed liquidity window, though well-intentioned, have yet to deliver tangible
improvements in trading depth.
To overcome these barriers, policy focus must shift toward streamlining insolvency
processes and improving coordination across regulators and stakeholders to enhance
market credibility. Equally important are unified, real-time market infrastructure and
stronger market-making mechanisms to reduce trading frictions and improve price
discovery. At the same time, lowering entry barriers for smaller issuers, diversifying the
investor base through targeted incentives, strengthening trustee powers and leveraging
technology-driven credit enhancement tools will be vital for building a more liquid,
transparent, and inclusive corporate bond market that can better support India’s long-
term growth. 63CORPORATE BOND MARKETCORPORATE BOND MARKET 64CORPORATE BOND MARKETCORPORATE BOND MARKET
Section 6
Deepening the Corporate Bond
Market: Way Forward 65CORPORATE BOND MARKETCORPORATE BOND MARKET
6. Deepening the Corporate Bond Market: Way Forward
This section outlines phased reforms to accelerate India’s corporate bond market, focusing
on regulatory efficiency, market infrastructure, innovation, and investor participation.
Drawing on global best practices, the roadmap addresses current constraints while
paving the way for deeper integration and long-term growth. A set of targeted measures,
structured in phases, is proposed, offering a sequenced implementation pathway to ensure
long-term sustainability.
The proposed measures are mapped across three implementation phases.
Phase I: Strengthening the Foundation Further (Short Term: 1–2 years)
• Focus on reinforcing core market infrastructure, addressing regulatory gaps,
and enhancing institutional capacity to enable future growth.
Phase II: Expansion and Innovation (Medium Term: 2–4 years):
• Driving broader market participation and introducing innovative frameworks
and instruments, building on the progress of the foundational phase.
Phase III: Integration, Maturity and Global Alignment (Long Term: 4–6 years):
• Advancement towards a fully integrated and mature ecosystem, aligned with
global standards and capable of sustaining long-term growth and resilience.
6.1 Enhance the Legal and Regulatory Framework: This section focuses on enhancing
legal and institutional frameworks for investor protection, market integrity, and better
accessibility.
Phase I: Streamline inter-agency regulations, further standardise disclosure norms,
and simplify issuance procedures to enhance legal and regulatory clarity.
(i) Enhance Regulatory Synergy across SEBI, RBI, and MCA
105
by streamlining
inter-agency alignment and unified guidelines to reduce operational
complexity, enhance clarity, and support seamless compliance. SEBI, RBI,
and MCA could start by issuing joint circulars clarifying their regulatory
responsibilities for products such as IPOs, ESG bonds, and buybacks.
A regulatory helpdesk or single-window contact for issuers and mutual
recognition of disclosures can further reduce ambiguity and duplicative
filings.
(ii) Strengthen and harmonise disclosure Norms/ Listing Obligations beyond
recent amendments (SEBI’s 2021 and 2023 amendments) to further
enhance interoperability. These may include:
yIntegrate real-time disclosure systems across exchanges and depositories
for automated reporting.
105 Refer Exhibit 1 under Section 6 of the Appendix for Examples illustrating problems caused by the lack of streamlined regulatory
processes 66CORPORATE BOND MARKETCORPORATE BOND MARKET
yHarmonise formats across Issue and Listing of Non-Convertible Securities
(ILNCS), LODR, and debenture trustee regulations.
yStandardise default definitions, materiality thresholds, and enforcement
protocols with uniform triggers and trustee timelines.
yEstablish centralised coordination with uniform reporting for issuers,
trustees, and CRAs to synchronise updates on assets, covenants, ratings,
and NPAs.
(iii) Refine the Shelf Prospectus and Streamline Issuance Frameworks to make
it more accessible and efficient for highly compliant and reputed issuers.
India’s evolving debt issuance and shelf prospectus frameworks show
promising alignment with global standards, yet several gaps remain —for
example, compared to the U.S. Rule 144A and Shelf Registration systems.
106

Reforms could include extending validity to 2–3 years, broadening eligibility
to mid-sized firms and startups with robust financial discipline, removing
tranche limits and allowing unlimited issuances within the validity period,
simplifying Prospectus and Allotment of Securities (PAS-2) Information
Memorandum filings via digital automation on MCA portal, introducing a
“Well-Known Seasoned Issuer” category for fast-track access, and creating
a centralised digital repository for real-time investor updates.
(iv) Strengthen and further refine the roles of Debenture Trustees (DT) by
issuing more transparent and unified operational guidelines, granting
stronger legal backing, and developing integrated data-sharing systems to
track asset cover and covenant breaches. Enhance institutional capacity,
particularly for smaller trustees, and fully operationalise the Recovery
Expense Fund (REF). Harmonise inter-creditor arrangements under SEBI’s
2019 Inter-Creditor Agreement (ICA) circular with trustee duties under the
IBC to improve post-default coordination and investor protection.
Phase II: Strengthen the bankruptcy and resolution process by improving IBC
effectiveness, fostering product innovation, and enabling better market access for
lower-rated debt.
(i) Strengthen Bankruptcy Laws and Resolution Framework
107
for managing
insolvency and exploring turnaround options.
Key areas for refinement in the current IBC mechanism include:
yRevamp the IBC Waterfall Mechanism for Fairer and More Transparent
Resolution Outcomes: Introduce a separate distribution framework for
106 Refer Exhibit 2 under Section 6 of the Appendix
107 Models like Singapore’s Debt Market Advisory Committee and specialised courts in the UK and Hong Kong offer useful exam-
ples for coordinated reform and quicker dispute resolution. 67CORPORATE BOND MARKETCORPORATE BOND MARKET
resolution plans, clarify the inter se priority among secured creditors,
reassess the treatment of government dues, strengthen the rights and
recoveries of operational creditors, balancing their interests with financial
creditors and enhance transparency and accountability in the distribution
process ensuring equitable outcomes for all stakeholders.
yExpand Judicial Capacity with Specialised Benches: Increase judicial
capacity by increasing NCLT/NCLAT benches, hiring more judges and
members to reduce backlogs, and creating specialised benches with
targeted training for better case management.
yImprove Resolution Professional (RP) Standards: Improve the quality
of resolution plans through enhanced training, licensing, and oversight,
while enforcing stricter penalties for misconduct or non-compliance.
yEnhance Resolution Quality and Timeliness: Accelerate timelines by
curbing frivolous appeals, improving resolution plan quality, standardising
asset valuation, managing interim assets effectively, and addressing
special asset classes like IP, data, and licences.
yEnhance alternative and Pre-Pack Mechanisms: The Pre-Packaged
Insolvency Resolution Process (PPIRP), introduced under the IBC for
MSMEs, offers a faster and more collaborative route to resolve financial
distress through pre-negotiated plans initiated by the debtor and
approved by creditors. It aims to preserve business continuity, reduce
litigation, and minimise disruption. While select cases have demonstrated
successful outcomes, including full repayment to operational creditors,
its broader adoption remains limited due to low stakeholder awareness,
procedural complexities, and reluctance among financial creditors to
engage outside the traditional CIRP framework. To unlock PPIRP’s full
potential, streamline procedural requirements, and enhance outreach
and capacity-building efforts to build institutional trust among MSMEs
and creditors.
yStrengthen the Contract Enforcement: Enhance enforcement by
expanding disclosures to cover emerging risks and market developments.
Greater synergy between SEBI and the IBC will need standardised
enforcement protocols, streamlined stakeholder coordination, expedited
resolution processes, and strengthened DT roles.
yEnable Cross-Border Insolvency: Harmonise regimes to handle
companies with overseas assets and operations.
To enhance Investor Protection, India can incorporate measures similar
to those undertaken under the US Dodd-Frank Act.
108
Regular SEBI or
108 U.S. Securities and Exchange Commission. 2025. “The Laws That Govern the Securities Industry.” Investor.gov. Accessed Sep-
tember 11, 2025 68CORPORATE BOND MARKETCORPORATE BOND MARKET
FIMMDA-led dialogues can address governance gaps, while stronger CRA
oversight, disclosures, trustee powers, and harmonised supervision with
clear resolution protocols will enhance stability.
The IBC Amendment Bill
109
, 2025 aims to evolve the IBC from a reactive litigation-
heavy regime into a faster, clearer, and more creditor-confident system.
(ii) Provide Issuance Framework for lower-rated corporate bonds to broaden
capital access, particularly for infrastructure-linked enterprises. Key
interventions (discussed in detail in other sections) may focus on:
yDevelopment of dedicated high-yield bond platforms and enhanced
market-making.
yOffering targeted tax incentives to attract long-term investors.
yImplementing credit risk mitigation strategies, including the promotion
of PCEs
110
.
Adopting global best practices, such as those prevalent in the U.S. high-yield
market, can provide valuable insights into designing investor protection
norms, disclosure standards, and credit enhancement frameworks.
The PCE facility introduced by NaBFID in the Union Budget 2025 is a notable step,
providing first-loss guarantees and credit support to infrastructure bonds and
marks a pivotal step in enabling lower-rated issuers to access the bond market. In
tandem, the rollout of the National Infrastructure Pipeline (NIP) and its associated
asset monetisation initiatives will significantly increase private investment demand.
Institutions such as NaBFID may be positioned to spearhead the creation of
investment vehicles like REITs, SM REITs, and InvITs, acting as investment managers
in collaboration with sectoral agencies (e.g., NHAI for road assets). This centralised
approach would streamline resource deployment and minimise institutional
fragmentation, reducing the need for separate government entities to operate
parallel investment platforms.
(iii) Establish a Unified Market Development Authority or Task Force by
building on Phase I. This could involve creating a centralised authority, such
as a Unified Corporate Bond Market Development Authority or Task Force,
comprising senior representatives from SEBI, RBI, MCA, MoF, and other key
stakeholders, with statutory backing and clearly defined mandates. Such
authority would be responsible for formulating cohesive policy frameworks,
addressing inter-regulatory bottlenecks and ensuring consistent
implementation of initiatives.The body should have a clear accountability
matrix with set timelines, delegated duties, and outcome tracking. It can
serve as an interim coordination unit or evolve into a dedicated statutory
regulator, depending on market needs.
109 Refer Exhibit 3 under Section 6 of the Appendix
110 Refer Exhibit 4 under Section 6 of the Appendix for more details 69CORPORATE BOND MARKETCORPORATE BOND MARKET
(iv) Leverage HTM reforms to deepen Bank participation in Corporate Bonds.
As of September 30, 2024, corporate bonds accounted for just 2.2% of SCBs’
HTM holdings.
111
To boost bank participation, the following reforms may be
considered:
yExpand HTM eligibility to include AA and below-rated bonds with
calibrated risk buffers and stronger due diligence norms.
yIntroduce tiered HTM limits linked to credit ratings to balance risk with
flexibility.
yAllow HTM classification for long-tenure infrastructure bonds, priority
sector instruments, and green/social impact bonds to align with India’s
sustainability goals.
yImplement a dynamic HTM buffer tied to macroeconomic indicators to
protect portfolios from rate-cycle volatility.
yPermit high-quality securitised assets to encourage risk diversification.
yMandate granular HTM disclosure by credit rating, sector, and maturity,
improving transparency and enabling better supervisory oversight.
(v) Advance Cross-Border Bond Settlement by adopting ISO 2002
112
to
strengthen India’s Global Bond integration. While the long-term benefits,
enhanced interoperability, enriched data standards, and alignment with
global settlement ecosystems are well established, effective implementation
requires phased and coordinated efforts. Key steps may include:
yInfrastructure upgrades across the RBI, CCIL, depositories, and exchanges.
yCapacity-building initiatives for market participants to ensure operational
readiness.
yPilot testing at GIFT City’s IFSC, alongside process mapping and
connectivity with global clearing systems.
Phase III: Focus on deeper market integration, adoption of global best practices,
exploration of an independent bond market regulator, and development of a digital
ecosystem.
(i) Establish a dedicated corporate bond Market Regulator
113
by building on
the foundational work of a multi-regulator Task Force (as proposed in Phase
II). Drawing on global best practices, such as those of the U.S. SEC, the
regulator’s mandate would cover all aspects of the corporate bond market,
including regulations, stakeholders, and infrastructure —issuance, trading,
settlement, disclosures, CRAs, and data management. This would ensure
cohesive market development, sustained supervision, and alignment with
international standards.
111 Reserve Bank of India. (2024, December 24). Chapter II: Financial Institutions: Soundness and Resilience.
112 PricewaterhouseCoopers Private Limited (PwC). 2021. “The Evolving Landscape of Cross-Border Payments.” PwC India.
113 Refer Exhibit 5 under Section 6 of the Appendix for Global Practices 70CORPORATE BOND MARKETCORPORATE BOND MARKET
(ii) Strengthen digital Infrastructure for Bond Issuance, Listing and Compliance
to provide an end-to-end ecosystem and ease market accessibility. Key
components may involve a centralised digital offer document generator,
smart contracts for automated covenant enforcement, a unified listing and
approval portal, workflow tools for trustees, credit agencies, and regulators,
and API integration with depositories and KYC databases.
While SEBI has taken steps toward digitisation
114
, a fully integrated and
digitally enforceable ecosystem remains in early stages.
6.2 Strengthen Market Infrastructure and Institutional Architecture: This section
outlines strategic steps to improve efficiency, enhance accessibility to foster broader
participation across primary and secondary bond markets.
Phase I: Enhance existing platforms and infrastructure to enable wider adoption,
encourage market making, and strengthen the reliability of credit ratings.
(i) Upgrade Existing Market Platforms and Infrastructure to reduce access
barriers. Strengthen the platforms such as NSE EBP, BSE Bond, NSE and
BSE RFQ and NSE Retail Direct with user-friendly interfaces, UPI-based
integration, integration with Digital KYC and Aadhaar-based verification and
mobile application integration.
It is also recommended to mandate RFQ usage for regulated entities under
RBI and PFRDA, building on SEBI’s successful implementation across FPIs,
mutual funds, AIFs, and insurance companies. Additionally, SEBI quotas
for RFQ-based trading among existing supervised intermediaries may be
enhanced.
In 2023, the RBI initiated consultations with market participants on enabling
Euroclear settlement for Indian sovereign bonds, a move widely welcomed by the
market.
115,116
(ii) Encourage Voluntary Market Makers
117
among large NBFCs, banks, and
financial institutions to deepen Liquidity. Developing a standing repo facility
specifically for investment-grade corporate bonds would help market
makers efficiently monetise their holdings. Clarifying regulatory roles
between SEBI, RBI and developing guidelines for quoting obligations and
inventory management will be critical. To enhance transparency, exchanges
or SEBI can maintain a registry of active market makers and publish data on
bid-ask spreads and traded volumes. Regulatory recognition of voluntary
market makers, with incentives such as reduced transaction costs, can
114 Refer Exhibit 6 under Section 6 of the Appendix 6 for additional details
115 Kumari, Anjali. 2023. “Bond Yields Decline as RBI Seeks Views on Settlement via Euroclear Platform.” Business Standard, Sep
7, 2023.
116 Refer Exhibit 7 under Section 6 of the Appendix for additional details
117 Refer Exhibit 8, Exhibit 9 and Exhibit 10 under Section 6 of the Appendix for additional details 71CORPORATE BOND MARKETCORPORATE BOND MARKET
ease entry barriers. Liquidity support mechanisms, such as piloting a bond
market liquidity fund backed by institutions like the RBI or Small Industries
Development Bank of India (SIDBI), can provide a safety net during periods
of market stress.
One of the factors limiting market making may be the RBI’s requirement for full credit
appraisal of issuers, even for short-term bond holdings, which increases compliance
efforts and encourages banks to focus on highly rated firms. Introducing a tiered
appraisal framework based on holding period could help ease this constraint.
Tier Holding Period Appraisal Requirement
Tier 1 ≤ 7 daysSimplified or based on external rating
Tier 2 8–30 daysAbbreviated credit note + rating
Tier 3 > 30 daysFull internal credit appraisal required
(iii) Improve the reliability of CRAs by enhancing the regulatory and oversight
framework.
yMandatory SEBI Registration: Only SEBI-registered CRAs can issue
ratings.
yProhibit Non-Registered Rating Providers: Ban ratings issued by
unregistered entities.
yConflict-Free Operations: Prohibit CRAs from offering consulting to
rated issuers.
yStronger Disclosures: Standardise and mandate clear and timely
disclosures of methodologies, assumptions, and rating watchlists.
yRegular SEBI Audits: Conduct compliance audits to ensure transparency.
yTighter Issuer-Paid Controls: Strengthen rules on issuer-paid ratings to
curb bias.
To support small issuers, India could introduce an alternative credit rating
framework via regulated exchanges or FinTech. By using data like GST returns
and digital transactions, AI-driven credit scoring would make ratings more
inclusive and cost-effective, easing bond issuance (Discussed in section 6.3).
For sustainable finance, ESG Ratings should be mandatorily supplemented
by Independent External Reviewers (IERs) to verify objectives, proceeds,
and alignment with sustainability goals. While SEBI’s ESG framework (2024–
25) requires IERs for some bonds, universal adoption across instruments and
regulatory oversight of IERs would strengthen credibility, market discipline,
and India’s Nationally Determined Contribution (NDC) commitments. 72CORPORATE BOND MARKETCORPORATE BOND MARKET
The US Dodd-Frank Act strengthened CRA regulations post-2008 by addressing
conflicts of interest, mandating greater SEC oversight, and increasing transparency
with stricter disclosure requirements on ratings and associated risks. The European
Union (EU) established comprehensive regulations after the 2008 global financial
crisis to ensure the integrity and transparency of credit ratings. It focused on Issuer-
Paid Model Restrictions, rating watch lists and public disclosure of the methodologies.
(Securities and Exchange Commission, 2014; European Parliament & Council of the
European Union, 2009)
Phases II and III: Institutionalise digital access for electronic trading; establish
a dedicated class of Corporate Bond Dealers; and strengthen the credit rating
agency framework.
(i) Build a unified, government-backed, investor-centric digital bond
platform modelled on successful systems like TreasuryDirect and TRACE
in the United States
118,119
to deepen investor access. The platform can host
diverse instruments (bond ETFs, municipal, green, covered, and social
impact bonds) and integrate with demat accounts, tax portals, fintech
platforms, and digital wallets. Investor-focused tools such as credit alerts,
yield calculators, risk metrics, maturity tracking, reinvestment options, and
AI-driven recommendations would enhance transparency and engagement.
For scalability, authorities may either upgrade existing platforms into a
unified interface or build a new comprehensive system.
(ii) Institutionalise Corporate Bond Dealers (CBDs) modelled on the U.S.
primary dealer system by selecting qualified banks, NBFCs, and FIs with
continuous quoting obligations to ensure liquidity in primary and secondary
markets. Operational support for CBDs could include structural incentives
such as capital relief on bond inventories and access to special refinance
from the RBI (also discussed in Phase I). In market stress, crisis tools such
as the U.S. Secondary Market Corporate Credit Facility (SMCCF) or Primary
Dealer Credit Facility (PDCF) could guide RBI/SEBI interventions to stabilise
spreads. Integrated market surveillance, real-time trade reporting, price
dissemination, and inventory disclosures would further boost transparency
and accountability.
During the COVID-19 pandemic (2020), primary dealers played a critical role in
supporting liquidity in both the U.S. Treasury and corporate bond markets. With
investors fleeing riskier assets, the Fed also launched the Secondary Market
Corporate Credit Facility (SMCCF) to purchase corporate bonds. Primary dealers
118 Moise, Imani. 2024. “TreasuryDirect to Bond Buyers: Moving Your Money Could Take a Year.” Wall Street Journal, October 9,
2024.
119 Asquith, Paul, Thom Covert, and Parag A. Pathak. 2019. “The Effects of Mandatory Transparency in Financial Market Design:
Evidence from the Corporate Bond Market.” MIT Economics. 73CORPORATE BOND MARKETCORPORATE BOND MARKET
were responsible for executing these transactions, ensuring liquidity by buying and
selling bonds. While the primary dealer system in each jurisdiction shares the core
responsibility of facilitating market liquidity, there are differences in their scope
and focus. U.S. primary dealers have a more active role in both government and
corporate bond markets, with direct Fed interventions in times of crisis.
(iii) Include Corporate Bonds in RBI’s Repo Framework (suggested by IMFs
FSAP 2025) to boost secondary market liquidity. RBI may consider including
high-quality corporate bonds in its repo operations. Allowing high-quality
corporate bonds to serve as collateral, as practised by the European Central
Bank, the Bank of Japan, and the Reserve Bank of Australia, would improve
issuer financing and attract institutional investors. Prudent safeguards on
ratings, tenure, and sectoral exposure can manage risks while supporting
market development.
(iv) Strengthen the CRA framework
120
by building on Phase I, focusing on greater
robustness, oversight, and improved utility of ratings to protect investors
better. Some steps may include:
yMultiple ratings for Large Issues: Bonds above a threshold (e.g., ₹500
crore) must have at least two independent ratings.
yImproved Rating Watchlists: Standardise timely, consistent rating
watchlist disclosures.
ySeparation of Functions: Distinct teams for initial ratings and ongoing
surveillance.
yMandatory Publications: All credit ratings for bond issues must be
publicly published.
yRating Transition Databases: Track rating changes to improve models,
transparency, and risk assessment.
yStrengthened Governance: Stricter rules on board independence and
stakeholder representation.
yContinuous Oversight and Market Feedback: Regular SEBI audits and
stakeholder consultations for regulatory updates.
120 Refer Exhibit 11 under Section 6 of the Appendix to read about the CRA Regulations in the EU 74CORPORATE BOND MARKETCORPORATE BOND MARKET
6.3 Encourage the Issuer segment of the Market: This will include promotion
of bond issuances, supporting SME participation, and expanding risk capital to
stimulate sectoral growth.
Phase I: Enable easier access to capital markets and build momentum among
potential issuers.
(i) Streamline the regulatory requirements to encourage public issuance
of bonds. SEBI’s May 2024 Master Circular introduced key reforms for
private placement of debt securities, including mandatory use of the EBP
platform for large issuances and stricter pre-issue disclosure norms. Further
simplifying regulations, offering tax incentives, easing documentation for
smaller issuers, and strengthening investor protection
121
will enhance market
participation (Most of these measures form part of other sections in detail).
Japan has developed a strong corporate bond market, with tax incentives and
supportive policies that encourage corporations to issue bonds for expansion and
investment. The Japan Finance Corporation (JFC) provides support to small and
medium-sized enterprises (SMEs) in Japan by offering financing and guarantees
that help these companies issue bonds. Additionally, the Bank of Japan has been
actively involved in purchasing government bonds and corporate bonds as part of
its quantitative easing programme, which supports liquidity in the bond markets
(Japan Finance Corporation, 2022; Nakazawa, Osada, & Bank of Japan, 2024; Japan
Securities Dealers Association & Study Group to Vitalize the Corporate Bond Market,
2010).
(ii) Enhance the Mandatory Market Borrowing Framework which currently
requires large corporates (LCs) to raise at least 25% of their incremental
borrowings through debt securities. To further strengthen it, the minimum
borrowing requirements for large corporates can be increased, further
classifications may be introduced demarcating mid-size, large and very
large corporates and smaller corporates can also be included within the
framework by relaxing the minimum 25% requirement. Tax incentives may
be provided for those that meet or exceed the mandatory thresholds.
Additionally, imposing stricter penalties for non-compliance will discourage
deviations from intended requirements and ensure adherence.
(iii) SME Bond Issuance through dedicated exchanges/bond platforms with
relaxed listing norms and products such as Mini-Bonds (discussed under
Italy’s bond market) can enhance their ability to access funding.
122
EBP
platform thresholds can be lowered to promote SME bond issuances. The
Ministry of MSME should introduce targeted financial incentives, modelled on
Viability Gap Funding (VGF), to cover the costs of advisors, intermediaries,
121 These measures have been discussed in detail in other parts of this section such as “Product Innovation”; “Regulatory enhance-
ments”
122 https://www.sebi.gov.in/sebi_data/attachdocs/1291112089228.pdf 75CORPORATE BOND MARKETCORPORATE BOND MARKET
and consultants, thereby reducing entry barriers. Exempting SMEs from
stamp duty will further lower issuance costs, given their higher spreads. To
ensure security and fair access, haircuts should be set according to SME
credit ratings, aligning collateral valuation with borrower risk.
The VGF scheme enhances the bankability of PPP projects, especially in social and
urban sectors, by bridging viability gaps through grants that reduce risk and improve
creditworthiness, enabling greater debt access and bond issuance. To strengthen
impact, it could adopt flexible funding tiers, streamline processes, bundle VGF-
backed assets into pooled vehicles like InvITs or municipal bonds, and integrate
technical assistance with credit enhancement tools to boost private participation.
The United Kingdom’s Alternative Investment Market (AIM), the London Stock
Exchange’s international market for smaller growing companies, is most commonly
cited as a successful SME exchange, having listed more than 3,400 companies from
around the globe since it was established in 1995 (World Bank, 2015).
123
(iv) Enhance the PCE framework (also discussed under other measures with
relevant scenarios) to enable banks and FIs to unlock long-term capital by
introducing innovative risk-sharing products, particularly for infrastructure
and mid-rated issuers. PCEs can elevate the creditworthiness of lower-rated
bonds, making them more appealing to investors.
124
This approach has been
effective in improving the credit profiles of infrastructure bonds.
125
Revise
the framework to align with Basel’s External Ratings-Based Approach
(ERBA) for nuanced credit risk assessment and better capital efficiency. This
improves the credit profile of lower-rated bonds, making them attractive
to investors and institutional players. Recent RBI proposals to raise PCE
caps and lower capital provisioning signal a move toward greater flexibility,
supporting broader market access and reducing reliance on bank loans.
(v) Enhance Access for Infrequent Issuers, particularly smaller corporates
or first-time participants, by cost-reduction strategies such as regulatory
subsidies for first-time or low-volume issuers, pooled issuance platforms
that allow multiple smaller issuers to access the market jointly, tiered
fee structures based on issuance size or frequency, and digital issuance
frameworks that streamline documentation and onboarding.
(vi) India should strengthen the role of credit enhancement and guarantee
institutions, such as India Infrastructure Finance Company Limited (IIFCL),
the National Investment and Infrastructure Fund (NIIF), and the Credit
Guarantee Fund Trust for Micro and Small Enterprises (CGTSME).
126
123 AIM has faced challenges resulting from the global financial crisis as weaker companies left the market during the recession. At
year end 2013 it had approximately 1,100 companies listed, down more than a third since 2007.
124 India Ratings and Research. 2025. Rating Criteria for Partial-Credit Guarantee Backed Debt. November 2025.
125 Vinod Kothari Consultants. 2025. “Partial Credit Enhancement: A Catalyst for Boosting Infrastructure Bond Issuances?” Vinod
Kothari Consultants
126 Refer Exhibit 12 under Section 6 of the Appendix to read about the Malaysian model of credit enhancement for infrastructure bonds 76CORPORATE BOND MARKETCORPORATE BOND MARKET
(vii) Lay Groundwork for Risk Capital to support startups and SMEs, driving
growth, innovation, and market liquidity, as seen in mature economies like
the US. Initial steps include regulatory enablement by creating innovation-
friendly regulations aligned with global best practices and encouraging
financial diversity through support for venture capital, private equity, and
alternative investment funds. Additionally, tax incentives such as expanded
R&D credits, targeted deductions for investments in credit-enhanced
instruments, and deductions for contributions to approved research
institutions and innovation hubs can further promote risk capital deployment.
Phase II: Deepen issuer participation, promote new asset classes and expand the
base of bond originators.
(i) Scale Up SME Bond Issuance, building on the groundwork laid in Phase I.
Phase II should focus on operationalising dedicated SME bond exchanges,
piloted with AI-driven credit scoring tools
127
. This is a critical step towards
building a tailored market infrastructure that addresses the unique financing
needs, enabling more efficient price discovery, greater visibility for issuers,
and improved investor participation. This should be supported by robust
market-making mechanisms and credit enhancement facilities tailored
to SME issuers. Introducing a dedicated repo window for market makers
dealing in SME bonds potentially backed by institutions like SIDBI can help
mitigate risk concentration and improve liquidity.
(ii) Deepen the Availability of Risk Capital to Support Market Innovation and
Infrastructure Growth. Building on foundational reforms (as outlined in Phase
I), Phase II should focus on attracting a broader pool of risk capital, such as
venture capital, private equity, and alternative asset managers, to fuel next-
stage market development. A deeper risk capital pool with spillover effects
can spur infrastructure upgrades and regulatory reforms.
Some steps can be taken to enhance the accessibility and flow of risk
capital:
yDevelop Diverse FIs: Encourage the growth of entities such as venture
capital firms, private equity funds, and alternative asset managers to
fund high-risk ventures.
yStrong Investor Protection Framework: Legal framework should include
clear disclosure norms, enforcement mechanisms, and fiduciary standards.
yTargeted Fiscal Support: Support through subsidies, grants, credit
enhancement for strategic sectors, with flexible norms for innovative or
first-time issues may be provided.
127 Refer Exhibit 13 under Section 6 of the Appendix to read about the AI based credit scoring 77CORPORATE BOND MARKETCORPORATE BOND MARKET
Phase III: Institutionalise issuer diversity, promote innovation for a sustainable
ecosystem.
(i) Institutionalise Issuer Diversity to broaden the breadth of the market by
integrating a wider range of participants, including sub-investment grade
entities, MSMEs, and municipal bodies.
Key measures (also discussed in detail under other measures of section 6)
include:
yRegulatory Reforms: Gradually ease minimum rating thresholds,
implement streamlined issuance frameworks and develop dedicated SME
platforms with proportionate compliance norms.
yMunicipal Participation: Enable municipalities to access bond markets
through pooled financing mechanisms, backed by state guarantees to
enhance creditworthiness.
y Risk Mitigation Tools: Institutionalise credit enhancement mechanisms
such as dedicated funds, first-loss guarantees, and anchor investor
schemes to reduce perceived risk.
(ii) ESG and Sustainable Finance: Offer targeted incentives, e.g., tax exemptions
on interest income, preferential exchange listings, and concessional blended
finance.
(iii) Deepen Risk Capital Integration to support issuers with higher credit risk and
innovative models (startups, infra SPVs, stressed assets), institutionalising
risk-taking. This requires:
y Developing secondary markets for private credit by enabling listing/
trading of structured debt, incentivising NBFCs/AIFs for market-making,
and strengthening trading/settlement infrastructure;
y Formalising participation of alternative asset managers by creating a
dedicated regulatory framework for AIFs, PE/VC funds, and sovereign
wealth funds, while enabling co-investment with domestic institutions
(SIDBI, NIIF) to de-risk entry; and
y Aligning regulations with global standards through IFRS-based disclosure
norms, specialised dispute resolution for defaults, and bondholder
protection mechanisms to safeguard minority investors.
(iv) Government and Central Bank Backstops to strengthen market resilience.
Phase III should focus on institutionalising sovereign backstops and
embedding them into the bond market architecture, not just as emergency
tools, but as standing mechanisms for systemic stability. 78CORPORATE BOND MARKETCORPORATE BOND MARKET
yPermanent Contingency Facilities, like a Corporate Bond Stabilisation
Fund that activates during market dislocations, with clear eligibility and
exit criteria.
yStructured credit enhancement by entities like IIFCL/NIIF through long-
term PCEs for strategic/systemically important firms, with transparent
pricing and risk-sharing.
yMacroprudential integration by embedding bond market stress indicators
into RBI’s stability framework for timely interventions.
yStronger legal infrastructure through statutory resolution frameworks,
bondholder rights, and dispute resolution mechanisms.
6.4 Foster Innovation in Instruments and Products: This section outlines key
strategies to foster innovation, enhance market depth, and create more investment
opportunities.
Phase I: Develop essential infrastructure, introduce accessible products, and
promote retail participation.
(i) Develop Corporate Bond Indices to track the performance of corporate
bonds effectively. These indices measure market performance, guide
investments, and serve as benchmarks for portfolio evaluation. By grouping
bonds based on factors such as maturity or credit rating, they provide
investors with a simple way to evaluate and diversify their portfolios. The NSE
introduced the Nifty Fixed Income Corporate Bond Indices
128
, segmented by
credit rating and duration, to enhance transparency. NSE also launched the
Nifty India Municipal Bond Index
129
, India’s first municipal bond index, further
promoting benchmarking.
(ii) Enhance the breadth of investment instruments for larger investor
participation.
yETFs and Index Funds for Secondary Market Liquidity: Building on
initiatives like BHARAT Bond ETFs, expanding Target Maturity ETFs
(TMETFs), and passive bond index funds can boost secondary market
liquidity. These instruments offer predictable returns, price discovery, and
accessible fixed-income diversification. Scaling requires broader offerings
across credit ratings (AA, A), sectors (e.g., infrastructure, renewable
energy) and tenors (short to long-term). Regulatory encouragement
should focus on easing approvals for new TMETFs, promoting education
on passive fixed-income strategies.
128 National Stock Exchange of India. 2025. “Fixed Income Corporate Bond Indices.” National Stock Exchange of India. Accessed
September 11, 2025.
129 NSE Indices Launches Nifty India Municipal Bond Index.” 2023. The Hindu, February 24, 2023. 79CORPORATE BOND MARKETCORPORATE BOND MARKET
yDedicated Corporate Bond Savings Account (CBSA): A CBSA could be
introduced as a tax-saving vehicle under Section 80C, similar to the Equity
Linked Savings Scheme (ELSS), encouraging long-term retail investment in
corporate debt. Banks and FIs can offer CBSAs, with SEBI and the Income Tax
Department defining eligible bonds, limits, lock-in periods, and withdrawal
norms.
To reconcile Section 80C savings incentives with the exemption-free tax regime, a
hybrid approach could allow a capped deduction (e.g., ₹50,000) for investments
in listed corporate bonds, debt mutual funds, or bond ETFs, with a focus on
priority sectors such as infrastructure, ESG, or MSMEs. Additionally, bonus
interest or tax credits for first-time retail investors could boost participation.
yGrowth of Green and ESG bonds: Regulatory bodies should undertake
targeted awareness campaigns, streamline listing and disclosure
requirements, and provide faster approvals or preferential regulatory
treatment (Discussed in other sections).
Brazil has issued green bonds to fund environmental and sustainability projects.
Brazil has established mechanisms to encourage the issuance of infrastructure
bonds, offering incentives such as tax exemptions and project guarantees for
energy, transport, and water projects.
130,131
yAdvancing the Municipal Bond Market: Strengthening the municipal
bond market requires targeted tax incentives, streamlined issuance, and
electronic listings to boost liquidity. Enhancing the financial transparency
of Urban Local Bodies (ULBs), building municipal capacity, and increasing
investor awareness are key to improving participation. Institutional
demand can be driven by mandating allocations from PFRDA, IRDAI,
and EPFO-regulated entities. Revamping pooled financing with credit
enhancements and promoting green/social bonds will attract diverse
investors. Institutions like NABFID, HUDCO, and the Urban Infrastructure
Fund can provide partial guarantees to support lower-rated ULBs. An
interest subvention scheme under AMRUT 2.0 can lower borrowing costs
and accelerate urban infrastructure growth.
Extending Viability Gap Funding (VGF) for MCs and ULBs, to support preparatory
activities, such as project appraisal and advisor payments, can play a significant
role in the PPP projects of the ULBs with future remunerative potential but
with viability gaps. Pilot run can be undertaken for 100 Municipal Corporations
and ULBs on a first-come, first-served basis to test the model’s effectiveness in
accelerating project readiness and bond issuance.
130 World Bank. 2024. “Brazil Sovereign Sustainable Bond: Financing a Greener, More Inclusive, and Equitable Economy.” World
Bank, February 8, 2024.
131 Borensztein, Eduardo, Eduardo A. Cavallo, and Pablo Pereira dos Santos. 2022. Infrastructure Bonds: The Case of Brazil. IDB
Technical Note No. 2454. Inter-American Development Bank. 80CORPORATE BOND MARKETCORPORATE BOND MARKET
Under the Scheme for Special Assistance to States for Capital Investment 2023–
24, the GoI introduced financial incentives to enhance the creditworthiness of
Municipal Corporations (MCs) and Urban Local Bodies (ULBs), preparing them for
municipal bond issuance. States achieving key reforms such as improved property
tax governance and ring-fencing of user charges, can avail up to ₹5,000 crore in 50-
year interest-free loans, encouraging sustainable urban infrastructure financing and
deeper participation in capital markets.
Phase II: Deepen innovation with targeted products and develop supportive
investment vehicles.
(i) Deepen Market Access through Diversified Instruments and Institutional
Ecosystems:
y Direct subsidy bonds: Direct subsidy bonds provide issuers with
incentives, such as government-funded cash rebates, to reduce net interest
costs and make bond issuances more attractive. To ensure accountability,
these subsidies may be performance-linked, with clear eligibility criteria,
claw-back provisions for non-compliance, and safeguards, such as PCEs,
to encourage retail participation.
An innovative model could involve “Impact-Verified Subsidy Bonds,”
where subsidy levels are dynamically tied to measurable environmental,
social, or other performance outcomes. By strategically addressing market
gaps, promoting ESG integration, and offering tiered incentives based on
verified impact, these bonds can foster a more inclusive, purpose-driven
bond market.
The above structure is used under the U.S. federal government Clean Renewable
Energy Bonds (CREBs) and Qualified Energy Conservation Bonds (QECBs)
programme.
yFractional Bond Investment Funds (e.g., Bond Ladder Funds): Funds,
such as Singapore’s Bond Ladder Funds, invest in bonds with staggered
maturities, spreading risk and offering periodic liquidity. Fractional
ownership lowers entry barriers for retail investors, enabling access to
diversified portfolios with smaller capital. They can also encourage new
issuances, improve financial literacy, and support products like bond
ETFs. Customising offerings by risk profile, bond type, and interest rate
outlook can further deepen the bond market.
yMarket for Covered Bonds: The IMF’s 2025 Financial Sector Assessment
Programme (FSAP) recommends promoting covered bond issuance by
banks and NBFCs to reduce reliance on unsecured debt and strengthen
credit market stability. Backed by high-quality collateral like mortgages 81CORPORATE BOND MARKETCORPORATE BOND MARKET
or public-sector loans, covered bonds offer safer, long-term funding and
can lower corporate borrowing costs. They can also support sustainable
financing in sectors like real estate and infrastructure, attracting a larger
institutional investor base. Developing a robust regulatory framework,
drawing on models from Germany, Denmark, and other countries, is
essential.
yCatalyse Growth through Sustainable and Responsible Financing
132,133
:
Promoting ESG bonds requires green taxonomies, well-defined
incentive structures and supportive fiscal measures, safeguards against
greenwashing, independent audits, innovative issuance strategies,
investor awareness campaigns, and a supporting regulatory framework.
Long-term clean energy and infrastructure investments have long
gestation periods and can be attractive to investors. India entered the
green bond market in 2015, and by 2023, cumulative issuance reached
USD 21 billion, accounting for 3.8% of total outstanding domestic
corporate bonds.
134
yPublic Listing of Corporate Bank Loans by allowing banks or consortia
of banks to publicly issue portions of corporate loan portfolios as bonds,
similar to private equity exits via listings. Piloting this with well-rated,
large corporates can test market response and build credibility. Listing
such exposures would diversify funding sources, enhance liquidity, and
offer a new investment avenue. Banks benefit from listing fees, reduced
exposure, and freed-up balance sheets, while corporates gain lower-
cost funding. Successful rollout requires clear listing and governance
standards developed with exchanges and regulators.
yMasala 2.0 Bonds Framework, as India’s first attempt at offshore rupee
bonds (Masala 1.0), saw limited uptake due to high issuance costs,
currency volatility, and weak secondary market liquidity. A revamped
Masala 2.0 could address these issues by leveraging credit enhancements,
such as partial guarantees from institutions like AIIB, thereby reducing
yield spreads and boosting investor confidence. Issuing via GIFT City
IFSC can streamline regulation and allow direct foreign capital inflows
without sovereign guarantees. India can also draw lessons from China’s
Panda Bonds (though they have a different objective than Masala Bonds),
which use structured credit support and strong domestic frameworks to
improve liquidity and participation.
132 Shrivastava, Manish Kumar, and Uday Veer Singh. 2024. Accelerating the Growth of Green Bonds in India. Policy Brief. The
Energy and Resources Institute (TERI), February 8, 2024.
133 Refer Exhibit 14 and Exhibit 15 under Section 6 of the Appendix to read about some Innovative Tax-Exempt and Impact-Linked
Green Bond Instruments
134 Singh, Uday Veer, and Manish Kumar Shrivastava. 2025. Accelerating the Growth of Green Bonds in India. Policy Brief. The
Energy and Resources Institute (TERI), April 2025. 82CORPORATE BOND MARKETCORPORATE BOND MARKET
Phase III: Institutionalise advanced structures and ensure long-term, sustainable
product depth.
(i) Longer Maturity products to support sustainable infrastructure and large-
scale corporate investments, through long-tenure corporate bonds (≥10–
15 years). Introduce targeted tax incentives for long-term issuers, such as
deductions on interest payments or withholding tax exemptions. Fast-track
regulatory approvals for infrastructure-linked issuances via a single-window
clearance. Develop pension and insurance fund mandates that allocate a
fixed percentage toward long-duration debt instruments. Launch targeted
investor literacy programmes, including sandbox trials and simplified
disclosures.
(ii) Integrated Market Development focusing on integrating municipal, ESG, and
corporate bond segments to build a cohesive and resilient ecosystem. This
can be achieved by promoting blended finance instruments that combine
public and private capital to fund large-scale sustainable infrastructure. For
example, a co-obligor structure could link a municipal green bond with a
corporate ESG bond, allowing investors to participate in both markets while
sharing credit risk. Additionally, re-securitised debt portfolios that pool
assets from different bond categories can broaden market appeal.
(iii) Global Integration and Scalability of sustainable bonds to boost credibility,
attract ESG-focused FPIs, and enhance impact reporting. It can be achieved by
aligning India’s green, social, and ESG bond frameworks with global standards
(e.g., ICMA, EU Green Bond Standard). Leveraging global bond indices and
interoperable digital platforms can further enable cross-border investments,
helping internationalise India’s bond market by integrating into the global
financial ecosystem.
(iv) Robust Anti-Greenwashing Measures through stringent verification,
transparent disclosures, and regulatory oversight, inspired by the EU’s
Sustainable Finance Disclosure Regulation (SFDR).
y Mandatory Verification & Disclosures: ESG bond issuers should undergo
SEBI-accredited third-party verification (pre- and post-issuance) and
disclose three years of baseline data with KPIs aligned to science-based
or peer benchmarks.
y Central Registry & Penalties: Establish a central ESG bond registry to
track issuances, fund use, and impact. SEBI should enforce penalties, e.g.,
coupon step-ups, blacklisting, or investor compensation, for greenwashing
or non-compliance.
y Standardised Reporting & Verifier Oversight: Mandate uniform ESG
disclosures aligned with Business Responsibility and Sustainability Report 83CORPORATE BOND MARKETCORPORATE BOND MARKET
(BRSR) Core, ICMA, and International Sustainability Standards Board (ISSB).
Regulate ESG rating/verifier agencies with transparent methodologies,
conflict-of-interest safeguards, and published track records.
6.5 Encouraging Broader Investor Participation: This section highlights strategies
to boost investor participation, including demat trading, direct purchases, mutual
fund quotas, relaxed prudential limits, simplified TDS rules, and stronger investor
education.
Phase I: Improve accessibility, reduce friction for retail investors, and build market
awareness.
(i) Encourage Demat Trading for Listed Bonds by improving accessibility
through integration with trading/banking platforms, UPI-based transactions,
and lower investment thresholds (₹1,000–₹10,000). Greater transparency
via real-time pricing, yield calculators, and standardised disclosures, along
with tax incentives, awareness campaigns, and digital marketplaces, can
boost participation. Regulators may also explore a safeguarded short-selling
framework to enhance price discovery.
Academic research and global experience suggest that short selling contributes to
more efficient pricing, especially in high-yield segments
135
, by allowing markets to
reflect negative sentiment and credit deterioration in real time.
(ii) Promote Direct Bond Platforms to buy and sell bonds with greater
transparency, access and lower costs. In India, the RBI’s Retail Direct platform
allows individuals to purchase government securities directly. Similarly,
the U.S. TreasuryDirect platform enables direct access to U.S. government
bonds. Internationally, platforms like SGX Bond Pro (Singapore), BondCliQ
(U.S.), and ASX’s Yieldbroker (Australia) offer varying degrees of direct
bond trading access. Though direct bond platforms aim to reduce reliance
on intermediaries, investors often still need brokers for execution, liquidity,
compliance, and settlement.
India’s corporate bond market is seeing a surge in Online Bond Platform
Providers (OBPPs) registered with SEBI, such as GoldenPi, Wint Wealth, and
BondsIndia. Increase Retail Quotas in Public Debt Offerings by setting aside
fixed quotas for retail investors in bond IPOs to enhance direct participation,
especially in tax-free or ESG-linked bonds.
(iii) Mutual Fund Quotas in Debt Offerings by allocating quotas for mutual funds
in debt issues. Such quotas may also ensure that institutional investors have
the necessary allocation to enhance market participation.
135 Hendershott, Terrence, Roman Kozhan, and Vikas Raman. 2020. “Short Selling and Price Discovery in Corporate Bonds.” Jour-
nal of Financial and Quantitative Analysis 55 (1): 77–115. 84CORPORATE BOND MARKETCORPORATE BOND MARKET
India has made good progress in debt MFs and a strong foundation in bond
ETFs. With greater investor awareness, bond ETFs can become a more
mainstream investment tool.
136
The U.S. uses non-competitive bids in Treasury auctions to guarantee retail
allotment, while Hong Kong’s iBond and Silver Bond programmes set retail-only
quotas. Singapore’s Savings Bonds are fully reserved for retail investors with capped
allocations to encourage participation. In the EU, green bond issuances often
prioritise ESG-aligned institutional investors through soft allocation mechanisms.
(iv) Strengthen investor education and risk-awareness Programmes by
expanding SEBI’s Investor Education and Protection Fund (IEPF) and
exchange-led initiatives to cover debt instruments, bond ratings, interest
rate risks, and diversification. Outreach through ‘Bond Melas’ in Tier 2/3
cities, multilingual campaigns, school and workplace programmes, and
partnerships with banks, NBFCs, and digital platforms can boost retail
awareness. Tools like mobile apps with yield calculators and credit risk
explainers can further support informed participation.
Globally, regulators like the U.S. SEC, the EU’s ESMA, Australia’s ASIC, Japan’s
JSDA, and the UK’s FCA have adopted robust educational strategies. These include
webinars, interactive learning platforms, and mandatory disclosures to improve
investor understanding of bond-related risks.
(v) Simplify TDS Regulations for Bonds by reducing complexities with the
risk of tax being deducted multiple times during secondary trades. Since
interest accrues but is typically paid annually, secondary buyers may bear
tax liabilities intended for previous holders. Removing or reducing TDS
on corporate bonds, or offering targeted exemptions (for retail and non-
resident investors) with proper compliance, can simplify taxation while
balancing investor ease and tax administration.
Phase II: Strengthen institutional participation and introduce tax-driven incentives
to boost volume and investor base.
(i) Review Investment mandates for institutional investors like pension
funds, insurance companies
137
which hold substantial long-term capital but
face restrictions limiting the bond market exposure.
138
A potential relaxation
of restrictions on investments, subject to appropriate risk management
safeguards, is warranted.
Policymakers may consider encouraging greater portfolio diversification
through soft exposure guidelines.
139
to invest in high-rated private issuers,
136 Refer Exhibit 16 under Section 6 of the Appendix to read more about the Bond ETFs market in India
137 Refer Exhibit 17 under Section 6 of the Appendix to read more about the global practices
138 Report of the Working Group on Development of Corporate Bond Market in India August 2016 - cloudfront.net, accessed May
9, 2025, https://dur682txgv28e.cloudfront.net/pointers/f57d6834-0cd0-4570-b7fa-27072485fa4d/pdf_doc/f239a4a4-184d-
455b-b10e-a360102f02dc_DCR10083.PDF
139 Soft exposure guidelines are non-binding recommendations that encourage institutional investors to diversify their portfolios by
allocating suggested proportions to specific asset classes, often supported by incentives but without mandatory requirements. 85CORPORATE BOND MARKETCORPORATE BOND MARKET
with incentive-linked mandates. A measured approach with annual caps and
staggered investments across credit ratings can help align assets with liabilities.
(ii) Tax Reforms by harmonising with the framework of its equity and G-secs
markets and recognising bonds as a long-term wealth-building tool.
yFor Retail Investors: Expand Section 80C (discussed earlier in context
of new tax regime) eligibility to include corporate bonds beyond just
infrastructure companies or create a separate window, like Section
80CCF. Mandate investments through debt mutual funds with a 3-to-5-
year lock-in period as an alternative to bank fixed deposits.
yFor Foreign Investors: There may be exemptions on WHT or reduced tax
rates on interest payments. Issuing bonds through International Financial
Services Centres (IFSCs), such as GIFT City, can offer favourable tax
treatment and streamlined regulatory compliance.
yEqualise capital gains tax treatment for different asset classes: India
taxes LTCG on listed equities and bonds at 12.5% without indexation after
12 months; however, only equities get a ₹1.25 lakh exemption; extending
this to bonds or creating a unified regime could ensure parity. Equity
MFs benefit from a 12.5% LTCG tax and ₹1.25 lakh exemption, while debt
funds face slab rate taxation regardless of holding period. A uniform
12.5% LTCG rate with a ₹1.25 lakh exemption for all assets, plus indexation
for bonds held over two years, could be adopted.
yTiered Tax Exemption on interest income: This could involve slab-based
taxation of interest income, with full exemption up to ₹50,000, reduced
rates for ₹50,001–2,00,000, and regular slab rates beyond that. This
structure encourages small investors by easing tax on modest interest
income while still rewarding larger investments.
yTax Credit for Initial Investment: A one-time tax credit of 10% on the first
corporate bond investment (capped at ₹10,000), with clear guidelines
and broker support for claiming, could incentivise retail investors to
overcome inertia and risk aversion.
yDedicated Corporate Bond Savings Account (CBSA) (also discussed
earlier): Banks and other FIs could offer CBSAs, with clear guidelines by
SEBI and the IT department for eligible bonds, contribution limits, lock-in
periods (if any), and withdrawal rules.
yParity of TDS between Corporate Bonds and Securitised Debt
Instruments (SDIs): Currently, Securitised Debt Instruments (SDIs) face
a disproportionately high TDS rate of 25% for resident individuals and
30% for corporates, compared to just 10% for corporate bonds. Aligning
the TDS rate on SDIs to 10% would eliminate tax-related distortions. 86CORPORATE BOND MARKETCORPORATE BOND MARKET
yExtending Capital Gains Tax Deferral to LLP and Direct Asset Transfers
in REIT/InvIT Framework: Capital gains tax deferral under Section 47(xvii)
applies only to SPV share transfers to REITs/InvITs, excluding LLP interests
and direct assets. Extending it to these would remove tax barriers, boost
contributions, and support REIT/InvIT growth, thereby enhancing bond
market liquidity through tradable, cash-flow–backed units.
yFavourable Tax Treatment for Municipal bonds: Grant targeted tax
exemptions for municipal bond investments (similar to US Munis), such
as exempting interest income, and allowing capital gains reinvestment
under Section 54EC.
(iii) Encourage Foreign Investors via stable FPI
140
rules such as simplifying
regulatory requirements and aligning with global best practices. Streamlining
registration, compliance, and reporting, and gradually relaxing investment
caps, can lower entry barriers for FPIs. Tax incentives like interest exemptions
or lower WHT could make corporate bonds more attractive to FPIs.
Investors are taxed on bond interest, while a few jurisdictions tax capital gains.
Exempting or easing these taxes, as in Hong Kong and Singapore, and adopting
simplified interest tax rates, as in Japan, Korea, and Singapore, could boost
participation, with withholding taxes for foreign investors adjusted via treaties.
The MoF is developing a unified climate finance taxonomy to help identify climate-
relevant projects, standardise instrument labelling to prevent greenwashing, and
guide sector-specific regulations.
Phase III: Deepen the market through greater integration with foreign investors,
enhanced investor engagement, and expanded product infrastructure.
(i) Institutionalise Investor Education to build long-term investor confidence
and expand retail participation, through a National Bond Literacy Mission.
Spearheaded by SEBI, in collaboration with AMFI, stock exchanges, MFs,
and market intermediaries, this mission can provide structured, continuous
education on fixed-income instruments by demystifying bond products,
credit ratings, and risk-return profiles.
(ii) Structured Finance Instruments such as Pass-Through Certificates (PTCs):
These instruments involve pooling various loans and issuing securities
backed by the cash flows from loans.
141
Credit enhancements and tranching
within PTCs can mitigate risks associated with lower-rated bonds, though
they still carry risks of borrower default and interest rate changes.
142
(iii) Enable Digital Platforms for Global Access by developing infrastructure for
cross-border issuance and trading through integrated digital channels. Key
measures include:
140 Refer Exhibit 18 under Section 6 of the Appendix to read more about Fully Accessible Route (FAR) and the global practices
141 Acuite Ratings & Research Limited
142 PIndiaBonds. 2024. “What Are Pass-Through Certificates (PTCs)?” IndiaBonds. Last modified October 28, 2024. 87CORPORATE BOND MARKETCORPORATE BOND MARKET
• Develop digital platforms for FPIs covering e-KYC, subscription, trading,
and settlement.
• Integrate with international depositories like Euroclear, Clearstream for
post-trade services.
• Use blockchain/DLT to boost transparency, shorten settlement, and
enable cross-border regulatory compliance.
• Align platforms with global standards (ISO 20022, FATF, IOSCO) to
ensure trust and compliance.
The UK government introduced the retail bond market, making it easier for individuals
to invest in bonds issued by companies and government bodies, boosting demand
for bond issuance.
143,144
6.6 Improving the Market Efficiency and Transparency: Strategies to boost capital
markets include better bond data, complementary markets, and stronger market-
making to enhance price discovery, liquidity, transparency, and investor confidence.
Phase 1: Lay the groundwork for transparent and efficient bond pricing and trading
by improving existing infrastructure, data availability, and pricing mechanisms.
(i) Establish a Real-Time Integrated Bond Market Data System for bond trades,
issuances, and pricing to enhance transparency and regulatory oversight
through anomaly detection, compliance, and evidence-based policymaking.
A centralised platform (like the U.S. TRACE
145
) would unify trade reporting
across venues, consolidating data from fragmented platforms such as
FTRAC and NSE-EBP, ensuring comprehensive, timely data access for all
participants, and improving price discovery. Leveraging data analytics can
further improve data quality, supporting the development of yield curves
that reflect investor sentiment.
(ii) Reduce the Cost of issuance by timely approvals and faster issuance
timelines. In markets where liquidity is episodic, timely market access can
help issuers tap favourable sentiment, lower costs, and optimise capital-
raising during liquidity windows. Shelf prospectuses for public debt, similar
to Australia’s Simple Corporate Bonds (SCB) regime, allow frequent issuers
to raise capital multiple times using a single base disclosure, reducing
turnaround time. The SCB framework enables listed issuers to issue plain-
vanilla bonds quickly (in 3 to 10 days).
143 Barclays. 2024. Retail Access to Corporate Bonds. London: Barclays;
144 Reuters. 2025. “UK Regulator Seeks to Simplify Bond Rules to Boost UK Investment.” Reuters, January 31, 2025.
145 In the U.S., TRACE (Trade Reporting and Compliance Engine) is a system operated by the Financial Industry Regulatory Au-
thority (FINRA) that provides real-time reporting of over-the-counter (OTC) transactions in corporate, agency, and structured
product bonds. TRACE ensures real-time bond price information to all market participants, promoting market integrity. By
distributing accurate trading data, it allows investors to assess the quality of their executions and helps regulators monitor
pricing and market activity effectively. (Financial Industry Regulatory Authority, 2024) 88CORPORATE BOND MARKETCORPORATE BOND MARKET
India should digitise the entire issuance process, provide handholding
support for first-time issuers, and further simplify regulatory interfaces to
enable faster disclosures and approvals, fostering a more agile and cost-
effective bond market.
The GID and KID formats by SEBI (discussed earlier) aim to reduce duplication and
simplify the disclosure framework for public issues of debt securities. India’s GID
and KID can be further simplified in line with global formats. The EU’s KID is a
short, standardised, and retail-friendly document with clear risk indicators and cost
breakdowns.
(iii) Strengthen the Benchmark Yield Curve across tenors to help establish
robust benchmarks across the maturity spectrum and enhance market
participants’ ability to assess pricing and risk. Trusted issuers such as public
sector undertakings (PSUs) and public sector banks can be encouraged to
issue bonds across a wider range of maturities. One measure could be to
mandate that at least 50% of their bond issuances with maturities exceeding
3 years be raised through public offerings, thereby enhancing secondary-
market liquidity. In parallel, the sovereign yield curve can be strengthened
through well-distributed issuances across tenors, such as 7-year, 15-year,
and 25-year maturities, with consistent calendars and issuance volumes.
(iv) Develop synergetic linkages between CDMDF and ARCL to enhance
settlement capacity. It is recommended to strategically link the CDMDF with
ARCL. Extending the government guarantee backing CDMDF to ARCL’s
Settlement Guarantee Fund (SGF) would strengthen financial resilience
and reduce counterparty risk. Additionally, enabling ARCL to transact
directly with CDMDF, through repo operations or purchase of investment-
grade corporate debt securities, would reinforce its operational capacity.
Recognising ARCL as a Qualified Central Counterparty (QCCP) under RBI
norms would lower capital provisioning requirements for banks and primary
dealers, thereby deepening participation in corporate bond repos.
(v) Boost transparency in OTC Markets to support informed decision-making
across the bond market ecosystem. India’s over-the-counter (OTC) corporate
bond market currently relies on multiple platforms for trade reporting such
as FTRAC by FIMMDA, CCIL’s NDS-OM, and the BSE BOND and NSE-EBP
systems. To boost transparency and improve overall market efficiency, it
is important to mandate near-real-time reporting of OTC corporate bond
transactions and to ensure broader public access to trade data.
Phase II: Deepen market participation, build robust complementary markets, and
enhance liquidity
146
in primary and secondary bond trading.
(i) Develop Complementary Markets such as repos, securitisation, and
derivatives to enhance liquidity, risk management, and market depth.
146 Refer Exhibit 19 under Section 6 of the Appendix to read more about liquidity enhancement mechanisms in different countries 89CORPORATE BOND MARKETCORPORATE BOND MARKET
• Repos for Liquidity and Price Discovery: Repos enable short-term
funding and liquidity, aiding price discovery and risk management. While
SEBI and RBI have advanced tri-party repo frameworks, expanding their
scope with strong safeguards can deepen the market. A phased rollout,
starting with highly rated bonds, would ensure controlled implementation.
• CDS for Credit Risk Transfer: CDS enable credit risk management and
accurate pricing. A well-regulated CDS market will help institutional
investors hedge risks and improve liquidity. Current rules restrict NBFCs to
hedging only, limiting their market-making role. Allowing well-capitalised
NBFCs to act as CDS market-makers under safeguards would boost risk
transfer efficiency.
• Securitisation for Funding Diversification: Converting illiquid assets into
tradable securities provides an alternative to traditional credit, enhancing
funding flexibility
• Derivatives for Risk Management: The derivatives market, including
options and futures, can help manage interest rate and credit risks.
(ii) Developing Complementary Data Platforms and Tools to support
transparency. India must invest in advanced data infrastructure for
leveraging AI and machine learning (AI/ML) tools, which can significantly
enhance price prediction, risk assessment, and anomaly detection across
bond instruments. Complementary platforms should disseminate forward-
looking metrics such as implied credit spreads, liquidity scores, and real-
time market depth indicators.
Phase III: Establish a resilient, globally integrated corporate bond ecosystem with
diverse instruments, participants, and cross-border transparency.
(iii) Strengthen CDS and Risk Management Markets by focusing on deepening
liquidity, enhancing transparency, and integrating CDS with bond trading
systems. Key priorities include launching transparent electronic trading
platforms, aligning contract standards with global norms, linking CDS
spreads to real-time bond market data, and ensuring robust oversight by
SEBI and RBI. Integrating CDS analytics into fixed-income data systems will
enhance transparency, decision-making, and market resilience.
(iv) Strengthen Global Integration and Market Interoperability by aligning
India’s regulatory and reporting frameworks with global best practices,
building linkages with TRACE-like systems, promoting Indian bond listings
on global indices, and ensuring interoperability with international data and
trading platforms to enable cross-border settlement, transparency, and
attract foreign participation.
Currently, trade reporting is fragmented across platforms instead of a single
consolidated system. To improve efficiency, India can implement real-time trade
reporting, develop a consolidated platform that integrates data from CCIL, NSE, and
BSE, and expand access to bond trade data. 90CORPORATE BOND MARKETCORPORATE BOND MARKET
6.7 Technological Advancements can help increase Market breadth: Electronic
trading platforms have improved transparency and lowered costs; further
enhancements like user-friendly interfaces, real-time data, and advanced analytics
can aid investor decisions.
Phase I: Improve accessibility, streamline basic operations, and build digital
infrastructure to enhance investor participation.
(i) Mobile and Internet Banking can expand digital banking interfaces to
provide easier access for retail investors, enabling direct bond purchases
and account management online.
(ii) Robotic Process Automation (RPA) can automate repetitive back-office
operations like data entry, settlement confirmations, and compliance
documentation.
(iii) Centralised Bond Repositories by establishing centralised systems for
storing and tracking bond issuance and ownership, reducing fragmentation
and improving transparency.
Phase II: Enhance analytical capabilities, support informed decision-making, and
deepen market intelligence.
(i) Artificial Intelligence (AI) and Machine Learning (ML) by using predictive
analytics for pricing, risk evaluation, and investor behaviour modelling to
support issuers and investors.
(ii) Big Data Analytics by leveraging large-scale datasets to uncover trends,
assess systemic risks, and refine bond market strategies based on real-time
and historical data.
(iii) RegTech Solutions by deploying smart regulatory technologies for real-
time monitoring, automated compliance, and improved reporting accuracy
for participants and regulators.
Phase III: Create a secure, transparent, and fully digital bond ecosystem with real-
time capabilities and global integration.
(iv) Blockchain Technology
147
with solutions for issuance, trading, and settlement
can enable tamper-proof issuance, trading, and settlement, reducing fraud,
errors, counterparty risk, and speeding up transactions.
(v) Advanced RegTech with AI Integration by developing AI-enhanced
regulatory systems capable of automated anomaly detection, risk supervision,
and adaptive regulatory responses.
Implementing these measures can create a more vibrant and efficient corporate
bond market in India, providing an alternative source of long-term funding for
corporates and contributing to financial market deepening and economic growth.
147 Refer Exhibit 20 under Section 6 of the Appendix to read more about blockchain technology 91CORPORATE BOND MARKETCORPORATE BOND MARKET 92CORPORATE BOND MARKETCORPORATE BOND MARKET
Section 7:
Conclusion 93CORPORATE BOND MARKETCORPORATE BOND MARKET
7. Conclusion
The current state of India’s corporate bond market is fraught with challenges,
including limited liquidity, a narrow investor base, and a complex regulatory
framework, as discussed earlier. Despite these issues, there are promising signs of
further development, driven by various government initiatives to deepen the bond
market. By improving market liquidity, simplifying regulations, and broadening the
investor base, India can develop a robust corporate bond market. Such improvements
will provide businesses with a diverse funding source, mitigate risks in the banking
sector, and promote robust economic growth.
Moreover, it is essential to note that while a well-developed corporate bond market
presents a compelling solution for broader credit access and economic growth, it’s
also crucial to recognise its potential as a platform for specific market segments.
For instance, it can serve as a dedicated platform for financing initiatives such as
the green transition. Here, environmentally conscious investors can directly support
sustainable projects through bond purchases, aligning their financial goals with
positive environmental impact.
Furthermore, infrastructure projects with a long-term outlook can significantly
benefit from the financing options offered by corporate bonds. This facilitates
these crucial endeavours without placing undue strain on traditional bank lending
models. Additionally, a well-developed corporate bond market can pave the way
for a robust municipal bond market. This empowers local governments to raise
capital for essential public services through bond issuance, fostering infrastructure
development. By catering to these specific segments, the corporate bond market
can play a crucial role in driving targeted economic growth. It can attract niche
investors seeking opportunities aligned with their values, such as environmental
sustainability or social impact, while simultaneously addressing specific financing
needs within the broader economy. This targeted approach allows the bond market
to make a significant contribution to India’s economic goals and its vision for a
prosperous future. The expansion is driven by increased infrastructure and corporate
capital expenditure, robust corporate financial health, and India’s positive economic
outlook.
However, achieving these goals will require a concerted effort from all stakeholders
to create a more efficient and appealing market for both domestic and international
investors. Moreover, regulators’ proactive efforts, coupled with innovative platforms
such as OBPPs and RBI’s Retail Direct, are creating an inclusive ecosystem. As India
focuses on ambitious infrastructure and corporate growth plans, the corporate bond
market is set to become an even more critical pillar of the country’s financial system.
These developments collectively indicate a bright future for the market, positioning
it as a key driver of India’s economic progress. 94CORPORATE BOND MARKETCORPORATE BOND MARKET
Appendix 95CORPORATE BOND MARKETCORPORATE BOND MARKET
Appendix
Note: Appendices are aligned with their corresponding section numbers. Sections 1
and 2 do not have associated appendices.
Section 3
Exhibit 1
CountryDescription
Malaysia
Bond market features few AAA issues and a much larger share of AA–BBB paper
because domestic investors—especially insurers, pension funds and banks are
content with A/AA and chase the higher yields on lower-rated bonds; issuers avoid
the extra expense and structural requirements of securing AAA when the yield
benefit is marginal; many government-linked issuers receive AA ratings reflecting
implicit support rather than full AAA; regulatory mandates set only investment-
grade minimums (not AAA); and the narrow spread between AAA & AA/A on the
benchmark yield curve provides little incentive to bear the cost of a top-tier rating,
making lower-rated issuance the natural choice.
148

Indonesia
About 49% of rated corporate bonds carry a AAA grade—well below the 100%
seen in the Philippines, because relatively less issuers meet the stringent criteria
for AAA, and domestic agencies award it sparingly . At the same time, nearly all
major domestic investors—mutual funds, pension funds, banks, and insurers—are
restricted to holding bonds rated A or above and see minimal extra benefit by going
AAA instead of A/AA, so both issuers and investors gravitate toward the AA/A
segment, where demand is strongest. Firms rated below A (i.e., BBB and lower) find
it hard to place bonds at all—just 3% of outstanding issues—because regulatory rules
for public offerings require investment-grade ratings and investors insist on buffers
against downgrades. The result is a relatively smaller AAA slice and a large AA/A
“middle” in Indonesia’s corporate bond market compared with its ASEAN peers.
149
Thailand
“A” ratings are dominant and even a significant share of BBB ratings is observed in
Thailand. Local rating agencies apply relatively lenient criteria, awarding A grades to
many issuers, so fewer firms incur the extra cost of achieving AAA, suppressing AAA
offerings. Institutional investors—including life insurers, pension funds and mutual
funds—are typically mandated to hold only A– or above and find the yield pickup
from AAA to A– negligible (spreads from AAA to A– run under 70 bps across tenors),
steering issuance into the A segment where demand is strongest. At the same time,
highnetworth and retail buyers are drawn to BBB+ and even unrated issues for their
higher coupons, ensuring robust funding for lower-rated paper. The spread between
A– and BBB+ is unusually wide (over 130 bps for a fiveyear bond).
150
Exhibit 2: Comparative Overview of Bond Market Makers Across Countries
CountryKey Market Makers
IndiaBanks (especially PSU), Primary Dealers (limited role)
ThailandBanks, Securities Firms, Thai Bond Market Association (ThaiBMA)
VietnamBanks, Securities Firms, VBMA Market Makers (Outright & Repo)
ChinaBanks, Securities Firms, Interbank Dealers, Bond Connect Market Makers
United States Investment Banks, Broker-Dealers, Electronic Trading Platforms
JapanSecurities Firms, Banks, Institutional Investors
South Korea Banks, Securities Firms, Institutional Investors
148 https://documents1.worldbank.org/curated/en/150131601443507839/pdf/Malaysia-s-Domestic-Bond-Market-A-Success-Story.pd
149 https://www.cgif-abmi.org/storage/2022/10/Indonesia-corporate-bo nd-market-research-2022-FINAL.pd
150 https://www.cgif-abmi.org/storage/2021/09/Thailand-Corporate-Bond-Market-2020.pdf 96CORPORATE BOND MARKETCORPORATE BOND MARKET
Exhibit 3
“In the U.S., retail investors demonstrate sizeable engagement in the corporate bond
sector both directly and indirectly. As of 2023, approximately 10% of corporate
bonds are held directly by households, while indirect exposure through mutual
funds, ETFs ranges from 15% to 17%. This participation is facilitated by a mature
financial infrastructure, transparent pricing via systems like FINRA’s TRACE, and
the proliferation of fractional bond platforms that enable transactions in small sizes.
These innovations have significantly lowered barriers to entry for retail investors,
making corporate bonds a viable component of household portfolios.
Thailand, a developing economy, exhibits an exceptionally high level of retail
participation, with individual investors holding 38.95% of outstanding corporate
bonds as of 2023. This elevated share is driven by several structural and policy factors.
Thailand’s high retail participation in corporate bonds stems from favorable tax
incentives, widespread access via banks and digital platforms, low entry thresholds
like THB 1,000 on digital apps, regulatory support for accessible public issuances,
and a cultural preference for safe, income-generating investments.
This comparison highlights how both developed and developing markets can foster
retail engagement, though through markedly different mechanisms. While the U.S.
relies on financial innovation and indirect exposure, Thailand’s success stems from
inclusive policy design and accessible distribution.”
Exhibit 4: Tax Implications of Bonds, Equities, and Fixed Deposits in India

Instrument Type Interest/Dividend Taxation Capital Gains Taxation
Debt Security: Listed
Bonds
Taxed as Income from
Other Sources at slab rate
Long-Term (LTCG): 12.5% (no indexation) if
held >12 months
Short-Term (STCG): Slab rate if ≤12 months
Debt Security: Unlisted
Bonds
Slab rateSlab rate
Tax-Free Bonds
(PSUs) usually Listed
Exempt under Section
10(15)(iv)(h)
Capital gains same as other listed bonds
(LTCG: 12.5%, STCG: slab rate)
Equity Shares (Listed)-
Market Linked
Dividends taxed at slab rate
LTCG: 12.5% above ₹1.25 lakh (no
indexation) if held >12 months
STCG: 20% if ≤12 months
Equity Shares
(Unlisted)-PE/start-up
investment
Dividends taxed at slab rate
LTCG: 12.5% with indexation if held >24
months
STCG: Slab Rate if ≤24 months
Equity Mutual Funds Dividends at slab rate Same as listed equity
Debt Mutual Funds
Dividends at slab rate (if
opted)
All gains are STCG, taxed at slab rate,
irrespective of holding period (no LTCG
benefit)
Fixed Deposits Interest taxed at slab rateNo capital gains, only interest income
TDS on Interest:
Bonds (if listed & held in Demat) may attract TDS only if interest > 10,000/year.
FDs: TDS @10% if interest > ₹50,000/year (₹100,000 for seniors). 97CORPORATE BOND MARKETCORPORATE BOND MARKET
Section 4
Exhibit 1: United States – Apollo’s Role in Expanding Liquidity for Corporate Bonds
Apollo Global Management, a leading alternative asset manager in the United States,
has played a critical role in improving liquidity in the corporate bond market by
structuring customised debt solutions. Traditional banks have increasingly pulled
back from lending to mid-sized and lower-rated corporations due to regulatory
constraints and risk aversion. This created a financing gap, which Apollo addressed
by stepping in as a major lender outside the traditional banking system.
Apollo has structured financing for large corporations such as Intel, AT&T, and AB
InBev by transforming cash flows into investment-grade debt instruments, making
them more attractive to institutional investors like insurers and pension funds.
Through structured finance mechanisms, Apollo has broadened the investor base
and increased the liquidity of corporate bonds. The firm’s ability to charge a premium
for private debt underscores the demand for such financing solutions, especially
where traditional bond markets fall short. By leveraging securitisation and credit
enhancement techniques, Apollo has ensured that riskier debt remains viable and
investable in the broader financial ecosystem.
India can learn from Apollo’s model by fostering the development of private investment
firms that specialise in structured finance. Encouraging institutional investors to
participate in lower-rated bonds through credit enhancement mechanisms, such as
credit guarantee funds, can improve market liquidity and depth. 98CORPORATE BOND MARKETCORPORATE BOND MARKET
Exhibit 2: Timeline of Singapore’s Corporate Bond Market Reforms
151
PhaseKey Reform Area Description
1990s
Liberalisation &
Benchmarking
Opened up SGD market; developed a government
bond yield curve to support corporate bond pricing.
Statutory boards began issuing bonds from 1998,
laying the foundation for a quasi-sovereign issuer
base.
Late 1990s–2000s
Tax Incentives &
Issuance Facilitation
Introduced Qualifying Debt Securities (QDS)
scheme; exempted interest income from tax;
removed withholding tax for non-resident investors.
Early 2000s
Post-AFC Reforms &
Regional Integration
Launched ASEAN+3 Asian Bond Market Initiative
(ABMI) to deepen regional bond markets.; supported
regional market deepening via Asia Bond Funds
(ABF).
2006–2010
Market Infrastructure,
Trading & Liquidity
Developed repo/swap markets; diversified issuer
base; improved listing on SGX and launched bond
ETFs.
2011–2017
Retail Access & Issuer
Expansion
Introduced Bond Seasoning Framework (2016) and
simplified disclosure regimes for retail; launched Asian
Bond Grant Scheme (2017) to subsidise issuance costs
for first-time regional issuers.
2018
Settlement
Infrastructure
Enhanced Central Depository (Pte) Limited (CDP)
settlement; One of the features was a reduced T+2
settlement (earlier T+3).
2020sESG & Green Finance
Launched Sustainable Bond Grant Scheme (SBGS);
issued public-sector green bonds under Green Plan
2030.
2020s
Digital Infrastructure
& Regulatory
Modernisation
Promoted tokenised bond platforms under Project
Guardian
152
; MAS Corporate Debt Market Survey
(2024) highlights ongoing digitalisation and
regulatory upgrades.
151 References for the Exhibit 2
1. Bank for International Settlements. (2002). Development of bond markets in emerging economies. https://www.bis.org/
publ/bppdf/bispap11r.pdf
2. Bank for International Settlements. (2005). Asian bond markets: issues and development. https://www.bis.org/publ/bppdf/
bispap26.pdf
3. Bank for International Settlements. (2016). A spare tire for capital markets. https://www.bis.org/publ/bppdf/bispap85.pdf
4. Monetary Authority of Singapore. (2016). MAS makes it easier for retail investors to buy corporate bonds. https://www.mas.
gov.sg/news/media-releases/2016
5. Monetary Authority of Singapore. (2024). Singapore Corporate Debt Market Developments. https://www.mas.gov.sg/publi-
cations
6. Singapore Exchange Rulebook- 10th December, 2018 Amendments to the securities settlement framework and service en-
hancements,
7. Ministry of Finance Singapore. (2024). Singapore Green Bond Framework. https://www.mof.gov.sg/policies/fiscal/green-
bonds
8. OECD. (2024). Corporate Bond Markets in Asia. https://www.oecd.org/publications
9. UNESCAP. (2004). Development of the Singapore Bond Market. Asia-Pacific Development Journal. https://www.unescap.
org/sites/default/files/apdj-9-1-2-kee-jin.pdf
10. Hogan Lovells. (2017). MAS Asian Bond Grant Scheme. https://www.hog anlovells.com
152 Project Guardian, launched by MAS in May 2022, is a strategic initiative to explore asset tokenisation and decentralised finance
(DeFi) using blockchain and distributed ledger technology (DLT) to enhance efficiency in regulated capital markets. 99CORPORATE BOND MARKETCORPORATE BOND MARKET
Section 5:
Exhibit 1: Partial Credit Enhancement (PCE) for Infrastructure Bonds: Role of
NaBFID
Union Budget 2025 announced about setting up of a PCE facility under the National
Bank for Financing Infrastructure Development (NaBFID) to help issuance of bonds by
an infrastructure entity. As per a CII report (2022), the infrastructure financing gap is
estimated at over 5% of GDP. Approx. 80% of the investment in infrastructure space is
by government agencies (80%), and the remaining 20% comes from private developers.
Infrastructure bonds face challenges such as low credit ratings, long maturities, and
high perceived risks (like revenue uncertainty and regulatory hurdles), which limit
interest from institutional investors who favor shorter-term, highly rated securities. PCE
mitigates default risk through guarantees or reserve funds, enhancing credit ratings,
reducing borrowing costs, and attracting a broader investor base.
Some enhancements are needed for effective implementation of the PCE framework.
NaBFID should receive explicit RBI approval and be permitted to provide the full
PCE, rather than being restricted to a certain % limit per institution reducing the
time required to identify multiple institutions to fulfill the remaining PCE. Capital
requirements must be restructured under Basel III to better reflect actual risk
exposures. Also, allowing credit risk transfer would help reduce the PCE provider’s
exposure and operational costs. (Ghosh, 2025; RBI June, 2018)
Exhibit 2
Sr. No.ParticularsFY 2019-20 FY 2020-21 FY 2021-22
1 Total no. of Companies identified as LCs 232 233 231
2
Out of 1 above. No. of LCs, having
incremental borrowings
130 148 150
3
Amount of Incremental borrowings (in
`crore)
8,81,316 11,53,959 13,63,119
4 Out of 2 above, No of LCs having shortfall56 3850
5 Amount of Shortfall (in `crore) (X)21,426 12,267 55,050
6
Penalty @ 0.2% of the shortfall (in `crore)
-0.2%* (X)
43 25110
Source: SEBI
Exhibit 3: CDS Market Transformation and Regulatory Reforms
The global CDS market has undergone major transformation since the 2008 crisis, as
detailed in the BIS June 2018 report. Notional outstanding volumes declined sharply
from $61 trillion in 2007 to $9.4 trillion by 2017, largely due to trade compression and
a fall in speculative trading. A key development has been the widespread adoption of
central clearing, CCP-cleared CDS rose from 17% in 2011 to 55% by 2017, significantly
reducing counterparty risk. Post-crisis reforms also led to the standardisation of
contracts (mainly 5-year terms), enabling greater netting efficiency and clearing access. 100CORPORATE BOND MARKETCORPORATE BOND MARKET
The market composition shifted toward safer credit exposures, with investment-grade
and sovereign CDS gaining a larger share. These reforms, supported by global regulatory
mandates (e.g., G20, FSB), have made CDS markets smaller, more transparent, and
structurally more resilient.
Key developments across regions:
• In the US, the Dodd–Frank Act (2010) mandated CCP clearing and trade reporting
for CDS. Intercontinental Exchange (ICE) Clear Credit began clearing CDS in
2009, strengthening market infrastructure.
• The EU introduced European Market Infrastructure Regulation (EMIR) (2012) for
central clearing and trade repository reporting, and banned naked sovereign
CDS in 2011 to curb speculation.
• In Japan, the Financial Instruments and Exchange Law (2007) empowered the
Japan Financial Services Agency (JFSA) to regulate derivatives, and the Tokyo
Financial Exchange explored CCP-based CDS clearing from 2010.
• India launched its CDS market in 2011 and expanded participation through
regulatory updates. In 2024, SEBI allowed mutual funds to buy/sell CDS (up to
10% of AUM), boosting liquidity.
• The UK, following the Turner Review (2009), supported CCP development and
OTC derivatives transparency, with HM Treasury backing harmonised oversight
and trade reporting.
Section 6
Exhibit 1: Examples illustrating problems caused by the lack of streamlined
regulatory processes
(i) When a company issues hybrid instruments such as perpetual bonds or green
bonds, it faces conflicting disclosure and regulatory requirements. SEBI mandates
disclosure norms for listed debt instruments, while the RBI regulates capital
adequacy and risk weights for banks and NBFCs, and the MCA oversees company
law aspects. The absence of a harmonised framework creates ambiguity in
definitions, documentation, and investor disclosures, thereby slowing innovation
and increasing legal risks for issuers.
(ii) Issuers raising funds through debt face a complex regulatory environment requiring
multiple filings and disclosures. They must separately submit overlapping information
to SEBI for listed bonds, RBI for NBFCs and external borrowings, and the MCA
for company law compliance. These filings often have inconsistent formats and
differing timelines, significantly increasing the administrative and compliance costs
for issuers. This complexity discourages companies from tapping the corporate
bond market, limiting its growth and accessibility as a funding avenue.
(iii) When an NBFC raises funds through corporate bonds, it faces regulatory
complexity from multiple authorities. SEBI governs bond issuance for listed
entities, setting disclosure and investor protection norms. RBI regulates NBFCs 101CORPORATE BOND MARKETCORPORATE BOND MARKET
with prudential norms on capital adequacy, asset classification, and debt
issuance. The MCA oversees company law aspects such as asset charges, filings,
and governance. This overlapping oversight often results in compliance delays.
(iv) When a corporate bond issuer defaults and insolvency proceedings begin,
bondholders may face uncertainties. Although the IBC is managed by the MCA
and insolvency professionals, it is not very clear how SEBI’s investor protection
rules and RBI’s prudential regulations apply to bondholders during insolvency.
This may create confusion over bondholders’ rights and recovery priority,
weakening investor confidence.
Exhibit 2: Comparative Overview of Institutional Bond Issuance Frameworks – U.S.
vs India
153
Aspect U.S. – Rule 144A
U.S. – Shelf
Registration (SEC
Rule 415)
India – Shelf Prospectus &
Streamlined Issuance
Purpose
Allowed resale to
QIBs with reduced
disclosures
Efficient repeat
issuances under a
single filing
Enables issuance in multiple
tranches via single prospectus
(mainly for infra/PSUs)
Investor
Eligibility
Only Qualified
Institutional Buyers
(QIBs)
Open to all, including
retail
Public and QIB investors
(depending on mode)
Documentation
Exempt from full SEC
filing; offer memo used
Base prospectus +
supplements (Valid up
to 3 years from initial
filing)
File shelf prospectus once;
separate information
memorandum for each
tranche (valid for 1 year)
Timeline
Efficiency
Fast execution; exempt
from most public
registration delays
Efficient for frequent
issuers, reduces
repeated compliance.
Max four issuances per shelf
prospectus.
Somewhat simplified for
select issuers; limited
flexibility vs global peers
Disclosures
Limited but material
disclosures
Full SEC-level
disclosure; updates
via prospectus
supplement
Initial detailed filing + updates
per tranche. Mandatory PAS-2
filings before each tranche
add administrative overhead
Use by
Corporates
Broad use by
corporates and
financials
Primarily Well-Known
Seasoned Issuers
(WKSIs) with strong
compliance history.
Mostly PSUs, infra players,
and FIs; limited usage by
private corporates, Listed
entities with 3-year track
record. Smaller or newer
issuers may be excluded due
to stringent criteria
Digital &
Streamlined
Access
Depository Trust &
Clearing Corporation
(DTCC), Nasdaq
PORTAL; clear
templates
Yes
Manual processes largely;
electronic platforms (e.g.,
platforms) used, but not fully
integrated end-to-end
153 References List for “Exhibit 2”
1. Cornell Law School Legal Information Institute – Rule 144A
2. US Securities and Exchange Commission- Notification- Final rule 144A
3. Financial Industry Regulatory Authority- The Portal Market
4. SEC Final Rule File No. S7–03–19]
5. SEC Amendment File no- 333-174818
6. Cornell Law School Legal Information Institute- 17 CFR § 230.415
7. Cornell Law School Legal Information Institute- Definitions for 415
8. SEBI (Issue & Listing of Non-Convertible Securities) Regulations, 2021, Reg 6A, Filing of Shelf Prospectus, Regulation 6A(1)
9. Section 31, Companies Act, 2013
10. Ministry of Corporate Affairs- Instruction Kit for Form No. PAS-2 102CORPORATE BOND MARKETCORPORATE BOND MARKET
Exhibit 3: Proposed changes in the IBC Amendment Bill, 2025
Problem in IBC 2016 Fix in IBC Amendment Bill 2025 Negative that Disappears
NCLT delays, slow admission 14-day mandatory timeline Long pendency, value erosion
Promoter misuse via withdrawalEarly-settlement only rule Backdoor promoter entry
Ambiguity in default proof Standardised evidence norms Litigation over defaults
Secured creditor confusion Clear rights frameworkInter-creditor disputes
Separate handling of group
firms
Group insolvency framework Value loss from fragmentation
Weak liquidation oversight CoC oversight extendedPoor recovery, misuse
Unregulated intermediaries Wider service provider definitionLack of accountability
Rigid amendment process “Difficulty clause” for executive fixesPolicy rigidity
High litigation load Procedural clarity, fast-track optionsLegal clogging
Unpredictable outcomes Codification of precedents Investor hesitation
Exhibit 4: Credit Guarantees for Stronger South Asian Markets
Development of a South Asian Credit Guarantee Facility (SACGF) may be proposed
for strengthening Regional Bond Markets. India could explore the establishment
of SACGF, modelled after the Credit Guarantee and Investment Facility (CGIF)
under ASEAN+3. CGIF, a trust fund of the Asian Development Bank, provides credit
guarantees for local currency-denominated bonds, helping corporates access
longer-term funding while mitigating currency and maturity mismatch risks. A similar
facility could offer credit enhancements, improving issuer profiles and attracting
institutional investors. To operationalise such a mechanism, India may consider
housing SACGF under the Bay of Bengal Initiative for Multi-Sectoral Technical
and Economic Cooperation (BIMSTEC), a regional coalition with shared economic
objectives, or position it within GIFT City. Support from multilateral development
banks (MDBs) would further bolster credibility and ensure alignment with global
best practices. This initiative could also foster cross-border financial integration,
expand regional capital markets, and promote financial stability. 103CORPORATE BOND MARKETCORPORATE BOND MARKET
Exhibit 5: Overview of Corporate Bond Market Regulators: Global Practices in
Issuance, Trading, and Oversight
154
Country
Dedicated
Regulator
Regulates
Issuance
Regulates
Trading
Disclosure
& Listing
Oversight
Investor
Protection
Remark
India
SEBI
(partial
authority)
Yes-public
issuance &
listing
No-private
placement to
QIBs via RBI
Yes-listed
bonds
No-unlisted
or OTC
Yes-listed
bonds
No-unlisted
corporate
bonds
limited
to SEBI-
regulated
entities
Fragmented
authority: SEBI, RBI,
and exchanges share
regulation. SEBI lacks
unified oversight.
Thailand
SEC
(Partial
authority)
Yes-public
and private
bond
issuance,
and HNW/
private
programmes
and green
bonds
No-Listed
bond, OTC
or Unlisted
bonds
Yes-
Disclosure
Oversight
No-Listing
requirements
enforcement
Enforces
anti-fraud/
disclosure
laws,
conducts
inspections
and
sanctions
under SEA
Fragmented
oversight: SEC
regulates bond
offerings & disclosure
compliance; SET/
ThaiBMA
155
manage
trading & listing
processes
USA SEC Yes Yes Yes Yes
Fully integrated
regulation; supported
by FINRA &
TRACE for market
transparency.
UK FCA Yes Yes Yes Yes
Comprehensive bond
market regulation
including retail
access, disclosures,
conduct.
China
CSRC
(with
NAFR
oversight)
Yes Yes Yes Yes
CSRC is the
primary authority;
coordination with
NAFR enhances
systemic oversight.
Brazil CVM Yes Yes Yes Yes
Full regulatory
control, including
over sustainable
and structured bond
issuance.
154 References List for “Exhibit 5”
1. SEBI’S ILDS Schedule I – Disclosures, https://ca2013.com/schedule/schedule-i-disclosures_issue-listing-debt-securities/?
2. Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015 https://www.icsi.edu/media/webmodules/publications/
SEBI_(Listing_Obligations_and_Disclosure_Requirements)_Regulations_2015_A_Referencer_to_Debt_Securities.pdf?
3. Thailand journal of Law and Policy- Law Forum https://www.thailawforum.com/articles/Thailand-corporate-bond-market-
and-regulation-2.html?u
4. The Securities and Exchange Commission (SEC); Statutes and Regulations- https://www.sec.gov/rules-regulations/statutes-
regulations
5. Policy Statement PS25/10- FCA - Final rules for public offer platforms https://www.fca.org.uk/publication/policy/ps25-10.pdf
6. ASIC.gov – Disclosure documents info https://www.asic.gov.au/regulatory-resources/fundraising/disclosure-documents-
to-be-provided-to-potential-investors-when-raising-funds/
7. ASIC.gov- Powers Info https://www.asic.gov.au/about-asic/what-we-do/our-role/powers/
8. China Securities Regulatory Commission (CSRC)- US- Chuna Business Council https://www.uschina.org/wp-content/
uploads/2018/12/28_csrc.pdf
9. Financial Instruments and Exchange Act- July 2015 Financial Services Agency, Japan https://www.fsa.go.jp/en/laws_
regulations/faq_on_fiea.pdf?
10. Guideline for the Disclosure of Corporate Affairs- FSA https://www.fsa.go.jp/en/laws_regulations/disclosure/20180126.pdf?
11. Securities and Exchange Commission of Brazil (CVM)- Wikipedia-https://en.wikipedia.org/wiki/Securities_Commission_%28Brazil%29?
155 Stock Exchange of Thailand and Thai Bond Market Association respectively 104CORPORATE BOND MARKETCORPORATE BOND MARKET
Exhibit 6: Advancing Bond Market Innovation-Bond Central, Tokenisation, and
Regulatory Sandbox
SEBI has launched Bond Central

in February 2025, an information repository
developed by the Online Bond Platform Providers (OBPP) Association in collaboration
with Market Infrastructure Institutions (MIIs). The platform offers investors access
to detailed risk assessments, corporate bond documents, and disclosures, thereby
enhancing transparency and enabling more informed investment decisions. By
reducing information asymmetry and enhancing market transparency, this initiative
is a key step in SEBI’s broader push to improve bond market infrastructure, encourage
retail participation, and build trust in the fixed-income ecosystem.
To further advance innovation, SEBI should consider launching pilots for tokenised
bonds and updating OBPP regulations to accommodate digital bond issuance
and trading. A key enabler of such innovation would be the establishment of a
Regulatory Sandbox. This would provide a controlled environment where fintech
firms, startups, and financial institutions could test new bond-related products and
services without being subject to the full regulatory burden. SEBI would define the
sandbox’s eligibility criteria, scope, duration, and key performance indicators (KPIs).
Potential innovations include blockchain-based bond issuance platforms, AI-driven
credit risk assessment tools, and peer-to-peer bond lending models. Successful pilots
could be scaled through tailored regulatory frameworks, thereby strengthening the
digital infrastructure and resilience of India’s corporate bond market. (Securities and
Exchange Board of India, 2025)
Exhibit 7: PwC Analysis: Yield, Liquidity, and Trading Volume Gains from
Euroclearability
PwC conducted a study for six emerging economies whose markets in 2019 were not
Euroclearable namely Brazil, Colombia, India, Indonesia, Philippines and Turkey. The
study calculates that Euroclearability reduces sovereign borrowing costs by an average
of 28 basis points which is broadly equivalent to the yield differential of one credit
rating notch. For corporate borrowing, the study estimated a decline in borrowing costs
in the range between 10 and 18 basis points. In addition to this, it is also associated with
additional benefits of higher liquidity, lower yields and larger trading volumes. However,
economies like Indonesia and China, although listed in global indices have still not taken
the offshore Euroclear route for settlement. Euroclear settlement requires easing of
norms around withholding taxes and capital gains and the need to modify onshore
rupee settlement norms. (Iyer, 2022)
Exhibit 8: Mandatory market-making for top 100 corporate bonds, with SEBI-funded
liquidity windows
To address liquidity challenges stemming from market fragmentation and low
turnover, a phased approach to mandatory market-making is recommended. Initial
implementation should focus on the top 100 AAA-rated, large-issue corporate
bonds, where turnover and investor interest are relatively higher. This targeted 105CORPORATE BOND MARKETCORPORATE BOND MARKET
rollout minimises systemic risk while allowing for meaningful liquidity enhancement.
To support this initiative, SEBI-funded liquidity windows can be introduced, offering
market makers a reliable exit mechanism and reducing inventory risk. These
windows will also encourage participation from a broader set of intermediaries and
improve price discovery. The GIFT City IFSC provides an ideal sandbox to pilot this
framework, given its flexible regulatory architecture, global investor access, and
infrastructure for innovation. Insights from this controlled environment can inform
broader implementation across domestic markets.
Exhibit 9: Key Enablers for Active Market Making in Indian Corporate Bonds
Based on the ICMA-ASIFMA joint response to SEBI’s Consultation Paper, several detailed
incentives can be designed to support market making in India’s corporate bond market.
First, a crucial enabler is the calibration of capital and liquidity requirements as market
makers face high balance sheet and funding costs under current prudential norms like
the Leverage Ratio and Liquidity Coverage Ratio (LCR). Adjusting these requirements
can ease risk and incentivise active quoting. Second, the development of a liquid and
accessible corporate bond repo and securities lending market is essential.
Market makers rely on repos to finance long positions and reverse repos or securities
lending to cover shorts, particularly in illiquid instruments. Legal certainty for repo
contracts and central clearing infrastructure can further support this activity.
Third, regulators should promote efficient access to derivatives markets, including
interest rate swaps and credit default swaps, enabling market makers to hedge
duration and credit risk more effectively. This reduces the cost of carry and allows
for tighter bid-ask spreads.
Fourth, fee-based issuer-market maker arrangements can be encouraged voluntarily,
particularly in the initial months post-issuance, to enhance liquidity without imposing
formal quoting obligations on issuers. These should resemble liquidity provision
agreements seen in other jurisdictions and must remain commercial, not regulatory
mandates.
Fifth, strengthening interdealer market infrastructure, such as brokered markets or
central trading venues with RFQ protocols, can help efficiently manage positions
and improve turnover.
Finally, the approach to transparency and settlement rules must be calibrated carefully.
Overly stringent real-time public trade disclosures, particularly for large or illiquid
transactions, can expose market makers’ positions and reduce their willingness to
quote. Instead, delayed, anonymised trade reporting, (under exceptions) similar to
the FINRA TRACE model, may offer a better balance. Collectively, these measures,
focused on financing, risk management, infrastructure, and regulatory calibration,
form a coherent incentive framework aligned with global best practices for nurturing
corporate bond market making. 106CORPORATE BOND MARKETCORPORATE BOND MARKET
Exhibit 10: Hybrid Ecosystem of Technology and Intermediaries in Bond Markets
An interesting conundrum is whether the significant technological advancements
(EBP/RFQ) have actually removed most of the inefficiencies in the system and
made the jobs of arrangers/market makers economically unviable. Technological
innovations like EBP and RFQ platforms have undoubtedly enhanced transparency,
price discovery, and operational efficiency; however, they have not eliminated the
need for arrangers and market makers, especially in segments where electronic
platforms cannot guarantee liquidity or immediacy of execution.
Unlike equities, which are standardised instruments, corporate bonds are highly
heterogeneous; each issue can differ by tenor, structure, covenants, and embedded
options. This non-standardisation makes continuous two-way quoting by market
makers even more essential to facilitate liquidity and investor confidence, particularly
in lower-rated or less-traded bonds.
While the economics of market making have become more challenging, due to
tighter spreads, capital requirements, and a shift toward agency-based models,
their function remains critical. Even in technologically advanced and liquid equity
markets, market makers continue to play a key stabilising role.
Thus, rather than displacing intermediaries, technology has reshaped their role.
A hybrid ecosystem that leverages electronic efficiencies while preserving active
liquidity provision is vital for inclusive access across the rating spectrum.
Exhibit 11: EU’s Reforms
The European Union’s post-2008 reforms underscore the importance of regulatory
depth in managing credit rating reliability. The EU introduced the CRA Regulation,
supervised by the ESMA, which mandated rigorous oversight of rating methodologies,
ensured the separation of rating and advisory functions, and promoted transparency
through the disclosure of rating histories and criteria.
Additionally, the EU addressed the cost and accessibility barriers faced by small
issuers by proposing non-CRA credit assessments tailored exclusively for professional
investors accompanied by safeguards and disclaimers to differentiate them from
official ratings. By integrating similar reforms, including centralised supervision,
standardised rating governance, and accessible credit assessments for smaller
entities, India can build a more inclusive and trustworthy bond market aligned with
global best practices.
(Directorate-General for Financial Stability, Financial Services and Capital Markets
Union, 2017) 107CORPORATE BOND MARKETCORPORATE BOND MARKET
Exhibit 12: Exploring a National Credit Guarantee Corporation for Infrastructure
Bonds
The Malaysian model of credit enhancement for infrastructure bonds, endorsed by
institutions like the ADB and World Bank, offers a relevant precedent for India. In
this context, establishing a National Credit Guarantee Corporation to underwrite
lower rated bonds, with appropriate institutional and regulatory backing, could help
broaden the investible bond universe, attract long-term capital, and strengthen
infrastructure financing. However, given potential fiscal implications and moral
hazard risks, a comprehensive feasibility study is essential. Drawing on lessons
from Malaysia and India’s past DFI experience, the proposed entity would require
strong regulatory capital, robust risk controls, and conservative investment policies.
This assessment should be undertaken in consultation with key regulators. Subject
to findings and approvals, the initiative should be piloted initially to evaluate its
operational viability. (Asian Development Bank, 2014)
Exhibit 13: Pilot SME bond platforms with AI-driven credit scoring (e.g., using GST
data), enabling direct retail access to A-rated small enterprises
To unlock access to debt capital for small enterprises, India should pilot dedicated
SME bond platforms powered by AI-driven credit scoring, leveraging structured data
from GST, MCA-21, ITRs, and the Account Aggregator framework. Inspired by models
like Singapore’s Validus Capital, such platforms can enable retail and institutional
participation in A-rated SME issuances by improving underwriting transparency and
reducing intermediation costs.
While AI models offer faster, fairer risk assessment, challenges such as data
availability, algorithmic bias, and regulatory readiness remain. A phased pilot,
supported by SEBI, RBI, IFSCA, and MSME Ministry, can help test feasibility, build
market confidence, and lay the foundation for tech-enabled SME bond exchanges,
advancing financial inclusion.
Validus Capital (now GXS Capital) is a Singapore-based peer-to-business lending
platform offering short- and medium-term financing to SMEs. Since 2015, it
has supported over 65,000 businesses and disbursed more than US$1 billion. It
connects accredited individual and institutional lenders using technology to reduce
intermediation costs, and was acquired by GXS Bank to scale its digital SME finance
operations. Further, Singapore is actively encouraging AI adoption by SMEs through
a growing ecosystem of grants.
(World Bank,2006; Wendel & Harvey, 2006; “AI-Powered Credit Scoring Models,”
2025; “Validus Capital Pte Ltd,” n.d.; TechNode Global Staff, 2025) 108CORPORATE BOND MARKETCORPORATE BOND MARKET
Exhibit 14: Innovative Tax-Exempt and Impact-Oriented Bond Structures
Tax-exempt bonds are where bond investors do not have to pay income tax on
interest from the green bonds they hold (so issuer can get lower interest rate). This
type of tax incentive is typically applied to municipal bonds in the US market. In the
green bond space specifically, an example to highlight is tax-exempt bond issuance
for financing of wind projects in Brazil.
“Zero-Coupon Green Impact Bonds” can be introduced which wouldn’t just
offer tax-free interest; they’d be structured with the gain at maturity being tax-
exempt, contingent on the issuer demonstrably achieving ambitious, pre-verified
environmental impact targets (e.g., a specific level of carbon emission reduction,
renewable energy generation, or water conservation). This creates alignment of
financial returns with tangible sustainability outcomes, attracting a new breed of
impact-focused investors willing to forgo regular interest for a potentially larger,
tax-free lump sum tied to a greener future.
Impact investment funds can also significantly contribute to innovation in the product
market by specifically targeting projects or assets generating positive, measurable
social and environmental impact alongside financial returns. These funds actively seek
ESG-compliant bonds or social impact bonds, ensuring that the investments contribute
to sustainability goals, ethical business practices, and positive societal outcomes.
Exhibit 15: Strengthening India’s Green Bond Ecosystem through Global Best
Practices and Innovative Mechanisms
India’s current frameworks focus primarily on green bond issuance and voluntary
ESG reporting, lacking the comprehensive sustainability disclosure requirements
seen in regulations like the European Union’s Sustainable Finance Disclosure
Regulation (SFDR). The SFDR requires detailed ESG disclosures and the integration
of sustainability risks in investments, directing capital to sustainable activities. India
can learn from SFDR to build a strong sustainable finance framework that improves
transparency, accountability, and market growth.
Green bond issuance in India can be further boosted by addressing key cost, risk,
and regulatory challenges. Subsidising issuance expenses especially third-party
verification fees through fiscal measures such as dedicated green bond funds or
grant schemes, modeled after successful initiatives in Singapore and Malaysia, can
lower barriers for issuers. For example, Malaysia’s Green SRI Sukuk Grant Scheme
offers tax exemptions to investors, making green bonds more attractive; similarly,
India’s oversubscribed tax-free bond issued by the Indian Renewable Energy
Development Agency Limited (IREDA) in 2016 highlights investor appetite for tax-
efficient sustainable instruments.
Fiscal incentives aimed at stimulating demand such as tax exemptions or credits
for retail investors can allow issuers to reduce coupon rates, further enhancing the 109CORPORATE BOND MARKETCORPORATE BOND MARKET
appeal of green bonds. Credit enhancement mechanisms like guarantees or partial
credit funds are crucial to improving credit ratings and reducing issuer risk. The
2016 green bond by ReNew Power, guaranteed by the Asian Development Bank
(ADB) and India Infrastructure Finance Company Limited (IIFCL), saw its rating
rise from BBB to AA+, attracting strong investor interest. Leveraging support from
multilateral development banks (MDBs) such as the World Bank can also help de-
risk investments and raise market awareness.
Regulatory reforms, including the inclusion of green bonds under priority sector
lending mandates, mandatory ESG disclosure requirements, and allowing insurance
and pension funds to invest in these bonds, will further facilitate market growth.
Collaboration with development finance institutions (DFIs) to develop currency
risk hedging instruments can increase the attractiveness of Indian green bonds to
international investors.
Transparency and investor confidence can be enhanced by establishing dedicated
green bond listing platforms and expanding existing sustainability-linked bond
markets, such as those on the NSE, to include non-sovereign issuances. Mandatory
ESG performance reporting will further bolster market integrity.
Securitisation is another promising avenue to address credit risks associated with
smaller projects by pooling them into larger, more creditworthy issuances. Sub-
national Pooled Financing Mechanisms (SPFMs), which aggregate financing needs of
smaller municipal entities, can channel funds efficiently for sustainable infrastructure
projects. While India’s Pooled Finance Development Fund (PFDF) Scheme, launched
in 2006, has seen limited uptake, recent municipal green bond issuances by cities like
Ghaziabad and Indore demonstrate the potential to revitalise SPFMs for financing
energy, water, and waste management projects at the city level.
Innovative mechanisms such as discounting principal repayments on sovereign green
bonds based on greenhouse gas (GHG) reductions could further incentivise issuers.
Under such models, the discount amount would be tied to the verified climate impact
of projects financed, with environmental sponsors like the Green Climate Fund (GCF)
or MDBs providing financial support. This would create a multiplier effect by linking
bond servicing costs directly to environmental outcomes.
(Directorate-General for Financial Stability, Financial Services and Capital Markets
Union, n.d.)
Exhibit 16: Growth of Bond ETFs in India and Global Market Insights
India has made good progress in debt mutual funds and has established a strong
foundation in bond ETFs. With targeted reforms and enhanced investor education,
bond ETFs can become a more mainstream tool for fixed-income investing. Bond
ETFs, like BHARAT Bond ETFs, provide efficient access to AAA-rated public sector
bonds with low management fees and predictable returns. The Nifty BHARAT Bond 110CORPORATE BOND MARKETCORPORATE BOND MARKET
Index series (launched in Dec 2019), followed by the BHARAT Bond ETFs, led to
significant growth in debt ETFs. From an AUM share of 2% in Mar 2019, in the overall
ETF space, debt ETFs’ share rose to 14% by Apr 2024, with an AUM of ₹60,775 crore,
Equity and commodity ETFs accounted for the remaining share. By Apr 2024, the
total AUM of Target Maturity Debt ETFs and Index Funds reached ₹1,81,691 crore,
enhancing market depth and investor confidence. As per AMFI, the contribution of
the debt mutual funds in the total AUM (as on 31 Mar 2025) stands at 23%.
Corporate bond ETFs in the USA have significantly influenced the development of
the bond markets. For example, for May 2022, U.S. corporate bond ETF aggregate
trading volume ($207.4B) comprised about 24.9% of the total volume traded by the
underlying corporate bond market ($832.2B). Using ETF’s data, it was found that
including a bond in a creation or redemption basket of an ETF has a favorable impact
on the bond’s liquidity for both high-yield and investment-grade markets. The iShares
iBoxx $ Investment Grade Corporate Bond ETF (LQD) focuses on investment-grade
corporate bonds, providing investors with exposure to high-quality corporate debt
from US companies. The Vanguard Total Bond Market ETF (BND) tracks the Bloomberg
Barclays U.S. Aggregate Bond Index, offering broad exposure to U.S. investment-grade
bonds. (Finnerty, Reisel, & Zhong, 2025)
Source:AMFI
Exhibit 17: Role of Pension Funds and Insurance Companies in Strengthening
Corporate Bond Markets
In the U.S. and EU, allowing pension funds and insurance companies to allocate
significant portions of their portfolios to corporate bonds has been a key driver of
the development of a strong and liquid corporate bond market. Between 2005 and
2024, allocations to equities among the “Milliman 100” companies decreased from
approximately 61.8% to 23.7%, while fixed-income allocations increased from about
28.6% to 53.5%.
In Japan, the Government Pension Investment Fund (GPIF), one of the world’s largest
pension funds, has also played a pivotal role in the bond market development. Many
Japanese corporate pension funds treat fixed income as core assets with bonds 111CORPORATE BOND MARKETCORPORATE BOND MARKET
accounting for more than 30 per cent of domestic corporate pension funds’ total
assets. These strategic investments by Japanese pension funds have provided
corporations with essential capital, enhanced market liquidity, and contributed to
the overall stability and growth of Japan’s corporate bond market.
In Canada, Canada Pension Plan Investment Board (CPPIB) manages a diversified
portfolio exceeding $400 billion, investing across various asset classes, including
corporate bonds. CPPIB’s strategy emphasises diversification to mitigate risks and
ensure long-term financial stability.
Singapore has leveraged its pension funds and insurance companies to develop its
corporate bond market by encouraging long-term, stable investments and creating a
conducive regulatory environment. Singapore’s insurance companies, such as Great
Eastern and NTUC Income, actively invest in both government and corporate bonds to
balance risk and ensure steady returns for policyholders. For example, Great Eastern
offers the GreatLink Income Bond Fund, an investment-linked policy (ILP) fund that
primarily invests in corporate bonds, non-agency mortgage-backed securities, asset-
backed securities, and agency mortgage-backed securities. Similarly, NTUC Income’s
Participating Fund, with a market value of S$34.0 billion as of 31 December 2021, includes
a significant allocation to bonds. This investment strategy contributes to the depth and
liquidity of Singapore’s corporate bond market. The MAS promotes these investments
through favorable regulations, including the Singapore Stewardship Principles for
Responsible Investors, which encourage transparency and long-term investment in
multiple instruments including corporate bonds. (Wadia & Perry, 2024; Hodo, 2023; The
Great Eastern Life Assurance Company Limited, 2021; NTUC Income, 2022)
Exhibit 18: Extending the Fully Accessible Route (FAR) to Corporate Bonds
To further encourage foreign investment, India can establish a Fully Accessible Route
(FAR) similar to the one created for Government Securities (G-Secs). FAR for G-Secs
was introduced by RBI to allow FPIs to invest without any quantitative restrictions
on the total amount they could hold. This route also eliminated the complex
regulatory requirements and made the investment process more transparent and
accessible to foreign investors. FAR model can be extended to corporate bonds by
also additionally removing sectoral limits and overall caps on the amount foreign
investors can hold in corporate bonds. The SEBI and the RBI would need to ensure
that appropriate safeguards are in place to monitor and manage the risks associated
with foreign investment, such as market manipulation or excessive concentration of
foreign holdings in specific bonds or sectors. Providing tools for currency hedging
and enhancing the credit rating framework for corporate bonds could make the
route more appealing for FPIs. Similar to the G-Secs FAR model, there would also
need to be clear and accessible data on bond issuances, ratings, and liquidity to
make foreign investments more informed and secure. 112CORPORATE BOND MARKETCORPORATE BOND MARKET
Singapore provides a transparent and efficient regulatory framework for foreign
investors. The MAS plays a key role in regulating and overseeing the financial
market, making it easier for foreign investors to participate. MAS provides “Exempt
Bond Issuer Framework”, under which certain issuers (both domestic and foreign)
are exempt from specific regulatory requirements, such as compliance with certain
licensing requirements, provided that they meet certain conditions. This reduces
bureaucratic hurdles for foreign issuers and investors. Singapore offers no capital
controls or withholding tax on bond interest for foreign investors, making it an
attractive destination for global investment. Singapore allows foreign corporations
to issue corporate bonds directly in its market, offering transparency and easy access
to capital without excessive regulatory barriers.
Exhibit 19: Global Precedents for Liquidity Backstop Facilities in Corporate Bond
Markets
To institutionalise liquidity support, the RBI could consider launching a Corporate Bond
Purchase Programme (CBPP), modelled after the U.S. Federal Reserve’s Secondary
Market Corporate Credit Facility (SMCCF). Such a facility would allow the RBI to
purchase investment-grade corporate bonds during periods of market stress, thereby
injecting liquidity and anchoring market confidence. Institutional investors, particularly
mutual funds, could be supported through liquidity backstop mechanisms linked to
such programmes, encouraging their continued participation even in volatile periods.
Several advanced economies have implemented government-backed liquidity
facilities to stabilise corporate bond markets during periods of financial stress. For
instance, the U.S. Federal Reserve’s Secondary Market Corporate Credit Facility
(SMCCF), launched in March, 2020, purchased investment-grade corporate bonds
and ETFs to restore market functioning during the COVID-19 crisis, narrowing credit
spreads and enhancing investor confidence.

Similarly, the UK’s Covid Corporate Financing Facility (CCFF), managed jointly by the
Bank of England and HM Treasury, provided liquidity by purchasing commercial paper
issued by investment-grade firms, helping maintain credit flow to the real economy. In
Japan, the Bank of Japan expanded its purchase of corporate bonds and commercial
paper under a dedicated facility during COVID-19 in 2020, while the European Central
Bank’s Pandemic Emergency Purchase Programme (PEPP) included corporate bonds
to ensure liquidity across the euro area. These facilities were not permanent but acted
as standing backstops, offering critical support during periods of heightened volatility.
(Board of Governors of the Federal Reserve System, 2021; Barmes et.al, 2020.;
Fidelity International, 2020.; European Central Bank, n.d.) 113CORPORATE BOND MARKETCORPORATE BOND MARKET
Exhibit 20: Blockchain-Enabled Digital Bonds and Market Transformation
The emergence of blockchain technology globally has introduced the development
of digital bonds, a new alternative to traditional bonds that offers a range of
benefits. With the ability to issue, trade, and manage bonds on a decentralised and
transparent ledger, digital bonds on blockchain are positioned to transform the
traditional bond market. Blockchain technology for the bond market offers enhanced
efficiency, cost reduction, and transparency by enabling faster settlement times,
reducing counterparty risks, and automating processes through smart contracts.
It improves traceability, ensuring real-time tracking of ownership and transactions.
While blockchain’s potential for instant settlements and increased accessibility is
driving interest and adoption, challenges such as regulatory uncertainty, limited
liquidity, and the small scale of the market remain. The fragmentation of tokenisation
platforms complicates market integration, and the lack of interoperability between
different blockchain systems creates operational inefficiencies, hindering full market
potential.
The National Securities Depository Ltd (NSDL), in collaboration with SEBI, launched a
blockchain-based Distributed Ledger Technology (DLT) platform in 2022 to facilitate
the monitoring of security and governance in the corporate bonds market. This
platform aims to enhance transparency, bring discipline, and improve the monitoring
of security and covenants, contributing to a more efficient and transparent market.
(BNP Paribas Global Markets, 2024; Cognizant, 2023) 114CORPORATE BOND MARKETCORPORATE BOND MARKET
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Contributors
Pravakar SahooProgramme Director, NITI Aayog
Amit VermaDirector, NITI Aayog
Jyotika NagvanshiDeputy Director, NITI Aayog
Pooja TeotiaConsultant-I, NITI Aayog
Mala ParasharConsultant-I, NITI Aayog
Apica SharmaConsultant-I, NITI Aayog
Abhilasha MandaConsultant-I, NITI Aayog
Shreya AnuraktiConsultant-I, NITI Aayog
Salome Sara PhilipsYoung Professional, NITI Aayog
Riya JindalYoung Professional, NITI Aayog
Kavya RaoYoung Professional, NITI Aayog
Nikita GondolayYoung Professional, NITI Aayog
Kruthi RajYoung Professional, NITI Aayog
Deepening The Corporate Bond Market in India, 2025
Copyright@ NITI Aayog, 2025
Published: December, 2025
NITI Aayog
Government of India
Sansad Marg, New Delhi-110001, India 119CORPORATE BOND MARKETCORPORATE BOND MARKET
Disclaimer: The list of experts acknowledged above have provided comments or
inputs solely in their individual capacities. Their participation does not constitute
endorsement, certification, or approval of the contents of this report. Neither the
experts, nor any organization with which they are affiliated, shall be held liable for
any statements, interpretations, errors, or omissions contained herein.
Acknowledgement
We extend our sincere gratitude to the esteemed members of the Advisory Panel
for their invaluable guidance and constructive feedback in shaping the report. Their
diverse expertise, insightful suggestions, and critical perspectives have significantly
enriched the analysis and helped refine the recommendations.
Our heartfelt thanks go to all the distinguished experts:
S. No.Advisor NameAffiliation
1 Prof. Golaka C. Nath Xavier Institute of Management (XIM)
2 Prof. H. K. Pradhan Professor, XLRI, Jamshedpur
3 Dr. Sajjid Z. Chinoy Chief India Economist, J.P. Morgan
4 Dr. Prabhas K. Rath
Chief General Manager, Department of
Economic and Policy Analysis (DEPA), SEBI
5 Mr. Santanu Sengupta Chief India Economist, Goldman Sachs
6 Dr. Samiran Chakraborty
Managing Director & Chief Economist, India,
Citigroup
7 Dr. Sachchidanand ShuklaGroup Chief Economist, Larsen & Toubro
8 Dr. Tirthankar Patnaik
Economist, National Stock Exchange of India
(NSE)
9 Prof. Alok Kumar Mishra Professor, University of Hyderabad
10Ms. Pranjul Bhandari Chief India Economist, HSBC
11Prof. Bhavesh Garg Assistant Professor, IIT Ropar
12Adv. Shivam Rai Young Professional, NITI Aayog NOTES

Deepening the Corporate Bond Market in India