SEBI proposes incentives to boost retail participation in debt securities

SEBI proposes allowing incentives in public debt issues for retail and select other investor categories

The Securities and Exchange Board of India (SEBI) has 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.

Current regulations prohibit any person connected with an issue from offering incentives in any form. SEBI has now proposed an amendment to permit incentives for specific groups, including senior citizens, women, armed forces personnel like serving, retired, or widows of ex-servicemen, and retail investors. These incentives would apply only to the initial allottees and not in case of transfer or transmission of bonds.

SEBI consultation paper stated, “It is proposed to permit issuers to offer incentives in the form of higher coupon rate or discount to the issue price to certain categories of allottees like senior citizens, women, armed forces personnel (viz. serving Defence personnel, ex-servicemen and widows of ex-servicemen) and retail subscribers to encourage retail participation in debt securities, while providing a fillip to the number of public issuances in the debt market”.

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According to SEBI’s Annual Report 2024–25, the total public issuance of non-convertible debentures (NCDs) declined sharply from Rs. 19,168 crores in FY 2023–24 to Rs. 8,149 crores 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.

The said offering may be at the sole discretion of the issuer and shall be disclosed upfront in the offer document. Further, the said differential offering shall be limited to the original allottee of the public issue.

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