Sebi, RBI in talks to introduce corporate bond index derivatives

The Securities and Exchange Board of India (Sebi) is working with the Reserve Bank of India (RBI) to introduce corporate bond index derivatives as part of efforts to deepen the domestic debt market, said Ananth Narayan G, whole-time member, on Friday.

“Corporate bond index derivatives trading is another frontier in this regard. Good discussions are ongoing between Sebi and RBI, and we are hopeful that we will see progress soon,” Narayan said, adding that aligning the bond market’s platforms and settlement process with equities could help bonds emerge as a stronger investment class.

Secondary bond market volumes currently stand at about Rs 1.4 trillion a month, compared with equities where volumes of a similar scale are traded in just a day.

Sebi had framed regulations in 2023 allowing exchanges to launch futures on corporate bond indices comprising securities rated AA+ and above. However, these products have not gained traction so far.

To revive interest, Sebi is now working with RBI on a new protocol for the product’s rollout.

Outstanding corporate bonds have nearly tripled over the past decade, rising to Rs 53.6 trillion as of March 2025 from Rs 17.5 trillion in FY15. Despite this growth, Narayan noted, the market continues to be dominated by institutional investors such as banks, insurers, provident funds, and mutual funds.

“Retail and foreign investors remain on the fringes,” he said.

In recent years, Sebi has introduced several measures to broaden participation in the bond market. These include establishing a central database for corporate bonds under Bond Central, introducing norms for online bond platforms, and lowering the minimum investment size for privately placed bonds to Rs 10,000 from Rs 1 lakh.

“The broader point is this: developing alternate asset classes is not optional anymore; it is an imperative for sustained capital formation in India,” Narayan said.