SEBI proposal to cut corporate bonds' face value can boost retail participation: Zerodha CEO

Nithin Kamath, CEO of Zerodha

The Securities and Exchange Board of India's proposal to reduce the face value of corporate bonds, as mentioned in a recent consultation paper, can boost retail participation in the bonds market, said Nithin Kamath, the chief executive officer of discount broker Zerodha, on December 11.

The consultation paper released by SEBI on December 9 proposes reducing the denomination to a face value of Rs 10,000 from Rs 1 lakh at present.

This "can lead to greater retail participation" and make corporate bonds "affordable for retail investors", Kamath said.

The Zerodha CEO further suggested that for majority of the country, equities may not be the right instruments as they can be "scary because of the volatility".

Also Read: Why SEBI’s latest proposal for debt securities can be game-changing

The right product could be government bonds and "relatively safe corporate bonds" from quality issuers like public sector-undertakings and AAA-rated entities, Kamath posted on X. "These are good instruments for them to accumulate some savings and then invest in equity mutual funds and direct equities," he added.

The SEBI paper comes over a year after the market regulator, in October 2022, slashed the face value of corporate bonds to Rs 1 lakh from Rs 10 lakh earlier. The decision along with the mainstreaming of Online Bond Platforms (OBPs) has helped in enhancing the participation of non-institutional investors in the bond market.

SEBI's consultation paper on bond market also looks at introduce the concept of 'fast track' public issuance for debt securities.

"The main intention of a fast track public issuance of debt securities is to facilitate frequent issuers with a consistent track record, to make public issues of debt securities with reduced time, cost and effort," the paper stated.

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