Exclusive: Online bond platforms coming together to form an industry association

Many online bond platforms held an informal meeting in Mumbai on June 6

Online bond platforms are getting ready to organise themselves into an industry association, according to one person aware of the development but not authorised to speak at this stage. Reportedly, several online bond platforms including BondsIndia, Wint Wealth, BondsKart, Golden Pi and others held an informal meeting in Mumbai on June 6 to discuss the initial contours of an industry association – something on the lines of AMFI or the Association of Mutual Funds in India.

Online bond platforms that we spoke with said that SEBI has been encouraging the platforms to form an association to represent their common problems. The discussions are at a preliminary stage and the actual formation and registration of the industry association is still some time away.

The latest development is not surprising given that online bond platforms were brought under SEBI’s regulatory purview last year. The securities markets regulator released its ‘Registration and regulatory framework for online bond platform providers (OBPP)’ in November 2022. As noted by the regulator, given the significant increase in the number of people transacting on online bond platforms, it was time they be brought under a regulatory framework.

Matters of discussion

Explaining the intent of the industry players behind creating an association, the person mentioned earlier said that as of now, they have two main objectives.

One, to be a single point of contact for SEBI and other key stakeholders for the OBPPs, and two, to create investor education and awareness and thereby encourage greater retail investor participation in the bond market.

Given that a vast majority of bond issuances are privately placed (minimum bond face value of Rs 1 lakh, used to be Rs 10 lakh earlier), the bond market attracts very little participation from retail investors.

The association could take up other objectives for consideration at a later stage. If one were to draw a comparison with AMFI which has been around since 1995, it has served several objectives. Not only does AMFI represent the Indian mutual fund (MF) industry to SEBI, the government and other regulatory bodies, but also works as a self-regulatory body. The latter role entails prescribing codes of conduct and best practices for all industry participants including MF distributors. Creating awareness and protecting investor interest is yet another of AMFI’s objectives.

Under regulatory ambit

Note that, even before the OBPP regulations came into force, there were a few platforms that were being run by regulated entities. With the OBPP regulations, all such platforms have come under a uniform set of SEBI regulations making them a safer bond investing avenue for retail investors.

Thanks to many online bond platforms coming up, getting information on bonds and investing in them has become easier over the last couple of years. But the absence of regulatory control over them was an area of concern. The November 2022 regulations, however, helped rectify that. Most significantly, the regulations require that an online bond platform must register as a debt broker, and on meeting certain criteria, also as an OBPP with the exchanges. Also, OBPPs have been mandated to offer only listed bonds on their platform.

Also read: Online bond platforms back in the spotlight after debt fund tax but liquidity issues remain   

Given the evolving regulatory landscape, having an industry association will definitely help the OBPPs navigate this space better. Whether the association will work largely as an industry body for making representations to the regulator, or also act as a self-regulatory organisation that sets industry standards and investor protection norms, will only be known in time.

Efforts were made to reach out to a few OBPPs. Questions sent to two online bond platforms remained unanswered until press time.