Debt issuers can give incentives to some investors in public offers: SEBI

Debt issuers can give incentives to some investors in public offers: SEBI

The SEBI board on December 17 cleared proposal to allow debt issuers to offer incentives in public issues to certain categories of investors.

Debt issuers can give additional interest, discount to some investors, the board decided.

Market regulator expects debt issuance incentives to increase retail participation.

"Issuers of debt securities will be able offer incentives in the form of additional interest or a discount to the issue price to certain categories of allottees, viz. senior citizens, women, armed forces personnel namely, serving and retired defense personnel and widows and widowers of such personnel, retail individual investors or any other category of investors as may be specified by the Board from time to time. Such incentive shall be available to the initial allottee only and shall not be available in case the debt securities are transferred/ transmitted post allotment," said SEBI in a statement.

In late October, SEBI had released a consultation paper proposing to allow debt issuers to offer incentives, such as higher coupon rates or discounts on issue price—to certain categories of investors in public issues of non-convertible securities (NCS). The move aims to encourage retail participation and boost the country’s sluggish bond market.

According to SEBI’s Annual Report 2024–25, the total public issuance of non-convertible debentures (NCDs) declined sharply from Rs 19,168 crore in FY 2023–24 to Rs 8,149 crore in FY 2024–25. The regulator believes targeted incentives could help revive retail interest in the debt market.

SEBI noted that similar practices already exist across sectors. For instance, banks and NBFCs offer higher fixed deposit rates to senior citizens and women, while promoters offering shares through the stock exchange mechanism can provide discounts to retail investors in Offer for Sale (OFS) issues. Likewise, members of the armed forces receive discounts from airlines and travel companies.

The proposal will enable issuers to extend such incentives at their discretion, provided the discounts are disclosed upfront in the offer document. SEBI believes incentive on securities will enhance the competitiveness of debt securities for investors, which in turn may increase their participation in debt securities while meeting the dual objective of SEBI, i.e. to increase retail participation in debt market and, thereby, provide a fillip to the number of public issuances in debt market.