- SEBI is exploring a pilot framework for tokenisation of corporate bonds to deepen debt markets
- Outstanding corporate bonds grew from Rs 17.5 lakh crore to Rs 59 lakh crore recently
- Liquidity is thin, retail participation is below 1%, and bond market concentration remains high
Securities and Exchange Board of India is exploring a pilot framework for tokenisation of corporate bonds as part of a broader push to deepen India's debt markets, even as the regulator warned investors that corporate bonds are “not risk free.”
Speaking at CareEdge Ratings' Debt Market Summit, SEBI Chair Tuhin Kanta Pandey said the regulator is examining new market structures and regulatory reforms to improve liquidity, widen participation and strengthen trust in the bond market ecosystem. “We have a shared task to build a deeper, more liquid, more trusted debt market,” Pandey said.
India's corporate bond market has expanded sharply in recent years. Outstanding corporate bonds have grown from Rs 17.5 lakh crore to around Rs 59 lakh crore, while debt issuances in FY26 mobilised Rs 9.1 trillion — roughly twice the amount raised through equity markets. Yet despite that growth, SEBI believes structural gaps remain.
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Liquidity and Retail Participation Still Weak
Pandey said the market remains heavily concentrated across a limited set of issuers, ratings and sectors, restricting investor choice and limiting broader participation. “Bonds rarely trade, liquidity is thin, exits difficult and new investors hesitant,” he said. Retail participation also remains limited, with household bond penetration still below 1%.
SEBI noted that recent infrastructure measures, including the Request for Quote, or RFQ, platform, have helped improve access. Secondary market bond trades rose from 1.2 million in FY25 to 2.8 million in FY26.
The regulator is now working alongside the Reserve Bank of India and market participants to improve market-making frameworks and secondary market liquidity.
New Regulatory Approach Under Consideration
SEBI is also considering a separate regulatory classification for debt brokers and reviewing whether debt-only listed entities should face the same disclosure and compliance requirements as equity-listed companies. The regulator additionally plans issuer outreach programmes to encourage more companies to access bond markets directly.
Pandey said SEBI is reviewing the municipal debt securities framework with the aim of increasing retail participation in municipal bonds.
The proposed bond tokenisation pilot could become one of the more closely watched reforms. While details remain limited, tokenisation broadly refers to representing financial securities digitally on blockchain-based infrastructure, potentially improving accessibility, settlement efficiency and fractional ownership.
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