I have a piece with Nishant Prasad and Aniket Singh Charan in today's Financial Express on one area of reform to improve the corporate bond market, ie. focus on distribution. Below the full piece:
Every developed economy has one thing India lacks: a deep, liquid corporate bond market that works alongside banks and equity markets to channel long-term capital efficiently. India’s corporate bond market stood at roughly 14% of GDP in 2023. South Korea’s is at 79%. Malaysia’s is at 54%. Even China, which only began building modern credit markets in the 1990s, sits at 38%. The gap is not a minor statistical curiosity. It is a structural problem with real consequences for how Indian companies fund themselves — and at what cost. And despite years of regulatory effort, the gap has not meaningfully closed.
The issuance data is equally stark. India’s corporate bond issuance has remained below 1% of GDP every year since 2012. The United States issues between 5% and 7.5% of GDP in corporate bonds annually. China averages around 3.5%. Together, the two countries account for more than half of all global corporate bond issuance. India barely registers. The consequence is that Indian businesses — particularly those outside the top credit ratings — remain heavily dependent on bank financing, which is expensive, short-term, and often unavailable to smaller borrowers. This is not how you fund long-term infrastructure or sustain high-growth industries.
SEBI has not been idle. Over the past few years, it has pushed through several targeted reforms. Online Bond Platform Providers (OBPPs) now allow retail investors to buy listed debt securities through digital platforms, which has improved accessibility and brought some transparency to pricing. The Request for Quote (RFQ) platform on exchanges like NSE has created an electronic venue for secondary market trading. The numbers are encouraging: on March 2, 2026, the NSE RFQ platform recorded over 24,000 trades in a single day, up from just 80 trades a day in March 2023. That is a meaningful shift in trading behaviour, even if the overall market remains thin by global standards.
But regulatory action has its limits when the underlying structural problems remain unaddressed. The NITI Aayog’s December 2025 report, “Deepening the Corporate Bond Market,” sets out the issues plainly. Regulatory oversight of the bond market is fragmented across SEBI, RBI, and the Ministry of Corporate Affairs — a situation that creates inconsistency in compliance requirements and slows down market development. The report floats the idea of a dedicated bond market regulator, which is worth debating seriously, but even short of that, better coordination between existing regulators would help. Mandating RFQ usage for entities regulated by the RBI and PFRDA, expanding market-making incentives for NBFCs and banks, and introducing higher trading quotas to improve price discovery are all measures that could move the needle on secondary market liquidity. The infrastructure needs attention too: UPI integration, digital KYC, Aadhaar-based verification, and mobile-friendly platforms could meaningfully expand retail participation if implemented properly.
There is, however, one gap that neither SEBI’s recent reforms nor the NITI Aayog report adequately addresses: distribution. And this matters more than it might seem.
India’s mutual fund industry crossed ₹50 lakh crore in assets under management on the back of a well-developed distribution network. The SIP habit that transformed household savings behaviour did not happen through direct investment platforms alone — it happened because distributors got into living rooms, explained the product, and made investing feel accessible. The portfolio management services and alternative investment fund segments similarly rely on structured distributor relationships. In both cases, industry bodies like AMFI and APMI standardised conduct norms, ran certification programmes, and acted as a bridge between regulators and the market. The results are visible in the scale of participation.
The corporate bond market has no equivalent. OBPPs provide digital access to listed bonds, but their reach stops at the point where a customer needs to be found, educated, and guided toward a fixed-income product. Semi-urban investors, first-time bond buyers, and retail participants who might allocate money to corporate bonds given the right guidance simply have no one to call. There is no regulated class of bond distributors, no certification framework, no conduct norms specific to debt distribution. The last mile is missing.
Creating a structured bond distributor framework under SEBI, or through an industry body with regulatory backing, would address this directly. Eligibility criteria and certification requirements would ensure distributor competence. Conduct norms would protect investors from mis-selling — a concern that has derailed retail participation in other financial products. And a distributor network operating across physical and digital channels could do what platforms alone cannot: build trust, explain risk, and convert passive savers into active bond investors. The framework does not need to be invented from scratch; AMFI’s model for mutual fund distributors offers a ready template that SEBI could adapt for debt securities.
India’s corporate bond market has the regulatory intent and, increasingly, the infrastructure. What it lacks is the human layer — the intermediaries who expand markets not by improving platforms but by reaching the people those platforms cannot find. The mutual fund analogy is instructive precisely because it shows how distribution, not just product design or regulation, determines whether a financial market achieves scale. Fixing the missing link in India’s bond market will not happen through better apps. It will happen when there is someone on the other side explaining why a corporate bond belongs in a retail investor’s portfolio.
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