SEBI's proposal to offer affordable corporate bonds and increase retail investor participation

11 Dec 2023

The latest consultation proposal by SEBI to reduce corporate bonds’ face value to Rs 10,000 can lead to greater retail participation in the bond markets.

I think for the majority of our country, i.e. beyond the top 5 to 10% of the country yet to start investing, equities may not be the right instruments because they can be scary because of the volatility. A bad market phase or losses when they start will end with investors permanently leaving the markets.

Maybe the right product are government bonds and relatively safe corporate bonds from quality issuers like PSUs and AAA-rated entities. That is instruments with a lower risk profile than stocks but higher returns than banks FDs. These are good instruments for them to accumulate some savings and then invest in equity mutual funds and direct equities.

Corporate bonds in India haven’t been popular among retail investors because most of them are issued through private placements with face values of Rs 10 lakh+. This was reduced to Rs 1 lakh last year. In yesterday’s consultation paper, SEBI is proposing to bring this down to Rs 10,000. This makes them affordable for retail investors.

Hopefully, companies think of small investors as potential investors. If holding a company’s stock can help improve brand awareness, maybe having bonds can also do that?

Link to the consultation paper.

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