SEBI & RBI Working On Corporate Bond Index Derivatives: SEBI Chief

The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) are working together on a new initiative that could widen the range of products available in India's debt market.

Speaking at an investor conference in Mumbai, SEBI Chairman Tuhin Kanta Pandey said the two regulators are exploring the introduction of derivatives linked to corporate bond indices, a move aimed at improving participation and liquidity in the corporate debt segment.

New Products Could Deepen The Bond Market

India's corporate bond market has expanded steadily over the years, but policymakers have continued to look for ways to increase trading activity and improve market depth.

According to Pandey, work is underway on creating derivatives based on corporate bond indices. With corporate bond issuances crossing ₹9 trillion in FY26 and the market capitalisation-to-GDP ratio reaching 128%, he said bond index derivatives can help investors manage risk more effectively and make better asset allocation decisions.

Such products could give investors additional tools to manage risk and take exposure to the debt market without directly buying individual bonds.

The proposal is part of a broader effort to strengthen the overall ecosystem around corporate debt.

Liquidity Measures Also In Progress

Apart from the derivatives proposal, authorities are also working on a market-making framework announced in the Union Budget.

A working group is in the final stages of preparing the operational framework for the mechanism, the SEBI chief said. He added that the move is expected to boost liquidity in the corporate bond market by encouraging greater trading activity.

He also noted that the Electronic Book Provider (EBP) platform has been widened to include debt issuances by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), a step intended to improve transparency and efficiency in fundraising.

Push To Make Investing Easier

SEBI has also been taking steps to simplify market access for overseas investors.

The regulator said the SWAGAT framework offers a streamlined onboarding process for trusted investors, while compliance procedures for foreign portfolio investors investing in government securities have been eased.

Standardised documentation, digital signature-based submissions and online tracking systems have also been introduced to reduce paperwork and improve processing times.

SEBI is additionally working with custodian banks and the RBI to shorten the registration timeline for foreign investors entering Indian markets.

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Wider Reform Agenda Continues

The regulator is also reviewing several parts of the market structure.

These include improvements to block deal and closing auction mechanisms to strengthen price discovery, a review of capital requirement norms for stock brokers, and a proposed framework governing intraday borrowing by mutual funds.

Market participants believe that the proposed corporate bond index derivatives, together with the planned market-making system, could help broaden investor participation and make India's corporate debt market more active over time.

Sources:

The Indian Express

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