The Securities and Exchange Board of India (Sebi) has announced a major plan to simplify rules for debt-listed companies and attract more retail investors. The new proposals, released in a consultation paper on Monday, aim to make India’s bond market more inclusive, flexible, and business-friendly.

Public feedback on these proposals will be accepted until November 17.

Higher Threshold for High-Value Debt-Listed Entities

At present, companies with listed non-convertible debt securities (NCDs) worth ₹1,000 crore or more fall under the High-Value Debt Listed Entities (HVDLE) category. They must comply with strict corporate governance rules similar to equity-listed firms.

However, Sebi now plans to raise this threshold to ₹5,000 crore. The regulator believes the current limit no longer matches the scale and growth of India’s bond market. Consequently, only larger companies with greater market exposure will face tighter regulations.

According to Sebi, this shift will reduce the number of HVDLEs from 137 to 48 entities, cutting the count by nearly 64%. As a result, smaller issuers will benefit from lower compliance costs and improved ease of doing business.

Furthermore, Sebi stated that this approach aligns with the principle of “proportionate regulation”, ensuring that enhanced scrutiny applies only to entities with higher risks and larger operations.

Incentives to Encourage Retail Investors

To draw more retail investors into the bond market, Sebi has proposed new financial incentives. The regulator’s analysis indicates a sharp decline in funds raised through public issues of NCDs during FY2025 compared with the previous year.

Therefore, the new framework will allow issuers to offer:

• Higher coupon rates, or
• Discounts on issue prices

These benefits will specifically target groups such as senior citizens, women, armed forces personnel, and retail subscribers.

By introducing such incentives, Sebi hopes to make debt securities more appealing and increase public participation. Moreover, this move supports the regulator’s goal of making the bond market more accessible to everyday investors, not just large institutions.

Simplified Compliance for Debt-Listed Companies

In addition to incentives, Sebi plans to ease compliance requirements for companies that have listed only debt securities. This means such entities will no longer need to follow the same stringent governance norms as large equity-listed firms.

Key proposals include:

• Replacing the term “income” with “turnover” in defining material subsidiaries.
• Allowing special shareholder approval only if a non-executive director continues on the board after turning 75.
• Exempting nominee directors appointed by courts, tribunals, or regulators from age-related approvals.
• Removing the rule that requires filling an independent director’s vacancy within three months, provided the board remains compliant.

Overall, these adjustments aim to offer greater flexibility while maintaining transparency and accountability across debt-listed entities.

Reduced Disclosure Burden and Better Reporting Flexibility

Furthermore, Sebi seeks to streamline reporting procedures for debt-listed entities. The regulator has proposed removing the requirement to disclose related party transactions (RPTs) in quarterly compliance reports.

Instead, these disclosures will appear in the half-yearly RPT filings, as already practiced by equity-listed firms. This modification will help avoid duplication, saving both time and administrative effort.

In addition, Sebi has suggested the following changes:

• Allowing more flexibility in the timelines for compliance reports.
• Setting clear rules for appointing and removing secretarial auditors.
• Harmonizing RPT norms for equity and debt-listed companies while ensuring robust safeguards for investors and debenture holders.

By reducing redundant reporting and aligning processes, Sebi aims to make the regulatory environment more efficient and transparent.

Strengthening India’s Bond Market

Collectively, these initiatives underline Sebi’s vision to make India’s bond market more dynamic, inclusive, and globally competitive. By lowering barriers for smaller issuers and simplifying compliance, the regulator seeks to promote easier capital access.

At the same time, incentives for retail investors will likely bring in diversity and liquidity, making the market more balanced. Consequently, these reforms can strengthen investor confidence and encourage long-term participation.

In the long run, Sebi’s proposals could help India emerge as a regional hub for efficient and transparent debt markets, fostering sustainable growth in the financial ecosystem.

Conclusion

In conclusion, Sebi’s reform plan represents a well-balanced strategy to ease compliance, empower investors, and enhance governance. If implemented successfully, these measures could significantly boost corporate flexibility, attract more retail investors, and support the government’s broader financial inclusion goals.

Ultimately, the proposed changes have the potential to unlock India’s bond market’s full potential and contribute to the country’s overall economic development.