The Securities and Exchange Board of India is considering lowering net worth and capital adequacy requirements for debt-only brokers, in a move aimed at reducing entry barriers and expanding participation in India's corporate bond market, according to people familiar with the discussions.
The review follows industry feedback that current broker regulations are largely modelled on equity markets and impose disproportionately high capital, compliance and cybersecurity requirements on firms focused solely on fixed income products. Executives say these norms do not reflect the lower volumes and different risk profile of bond market activity.
At present, draft proposals released by SEBI in April link broker net worth thresholds to factors such as client balances and the size of the active client base. Market participants have pushed back against this approach, arguing that such benchmarks are better suited to large equity brokerages and could stifle smaller, specialised bond intermediaries.
In response, SEBI is examining a lighter-touch framework for debt brokers, including more relaxed operational, reporting and compliance requirements. The regulator is also reviewing whether a differentiated regulatory structure should apply to debt brokers and online bond platform providers, or OBPPs, given their narrower product focus.
Industry players are seeking lower net worth thresholds calibrated to the scale of corporate bond markets, where liquidity and retail participation remain limited compared with equities. They argue that easing these requirements would make it viable for more niche intermediaries to enter the segment.
The move is part of a broader effort to deepen India's bond markets and improve access for retail investors. Policymakers have increasingly pushed for greater participation in corporate bonds as an alternative investment avenue and a funding source for companies.
A more flexible regulatory regime for debt brokers could increase the number of dedicated intermediaries in the market, improve liquidity in secondary trading, and support better price discovery. It may also provide a boost to digital bond platforms by reducing compliance burdens and enabling them to scale their offerings for retail investors.
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