SEBI Proposes MFD-Style Channel Partners To Boost Retail Access To Corporate Bonds; Caps Fees At 2.5%

SEBI has proposed a new distribution framework modelled on the Mutual Fund Distributor system to widen retail access to corporate bonds and other permitted fixed-income securities. Under the proposal, Fixed Income Channel Partners will be enlisted with stock exchanges and appointed by Online Bond Platform Providers to help investors understand, access and transact in fixed-income products.

The regulator said the corporate bond market has expanded significantly, with outstanding corporate bonds rising from about Rs 17.5 trillion at the end of FY15 to more than Rs 60 trillion as of July 31, 2026. Listed corporate bonds account for about Rs 46 trillion, or 76.6% of the total market. Yet, retail participation remains limited, with debt securities still primarily accessed by institutional investors.

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SEBI Looks To Take Bonds Beyond Major Cities

SEBI said the OBPP framework has simplified access to listed debt securities by allowing investors to compare products and complete transactions online. This has also coincided with a sharp increase in activity on the Request for Quote platform.

The number of RFQ trades rose from 2.76 lakh in FY25 to 17.84 lakh in FY26, an increase of about 546%, a rise SEBI said was driven largely by increased retail participation through OBPPs. However, the regulator noted a structural gap in reaching investors outside major urban centres, including Tier II, Tier III and rural locations.

SEBI said its consultations with stakeholders highlighted the role played by MFDs in expanding mutual fund awareness and access in smaller cities. The proposed FICP framework is intended to adapt that model to the fixed-income market, with distributors helping investors understand product features and associated risks, complete documentation and access regulated platforms.

FICPs To Be Enlisted With Exchanges

Under the proposed framework, individuals and non-individual entities can become FICPs after meeting eligibility requirements. Individuals will need to be Indian citizens, at least 18 years old, have completed Class 12, and hold a valid NISM-Series: Fixed Income Securities certification, among other conditions. Existing AMFI-registered MFDs can apply without paying the applicable enlistment fee, subject to obtaining the relevant NISM certification.

FICPs will not be allowed to handle client funds or securities. Orders will be routed directly through the OBPP platform, while the OBPP will remain responsible for supervision, due diligence and monitoring of its appointed FICPs.

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On remuneration, SEBI has proposed that FICPs receive payment only from the appointing OBPP and not directly from clients. The commissions, fees or brokerage charged to clients would be capped at 2.5% of the value of the investment.

The consultation paper was issued on Aug. 21, with public comments invited until Sept. 11, 2026.

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