The Securities and Exchange Board of India on Tuesday proposed permitting Online Bond Platform Providers (OBPPs) to offer products and services regulated by the International Financial Services Centres Authority, as well as certain tax-saving bonds under the Income Tax Act. 

At present, OBPPs are allowed to offer securities and services regulated by domestic financial sector regulators such as Sebi, the Reserve Bank of India, the Insurance Regulatory and Development Authority of India, and the Pension Fund Regulatory and Development Authority. However, there is no existing provision for offering products governed by IFSCA. 

“In view of requests from IFSCA and to promote ease of doing business, OBPPs may be permitted to offer IFSCA-regulated products, subject to compliance with the Foreign Exchange Management Act (FEMA), 1999, including Overseas Investment Rules and limits under the Liberalised Remittance Scheme (LRS),” Sebi said in its consultation paper. 

The regulator added that such offerings would follow the framework applicable to Sebi-registered stockbrokers operating in the GIFT International Financial Services Centre. 

Tax-saving bonds to be included 

Sebi has also proposed allowing OBPPs to offer bonds issued under Section 54EC of the Income Tax Act, 1961, and Section 85 of the proposed Income-tax Act, 2025. These bonds, issued by government-notified entities such as Power Finance Corporation, Indian Railway Finance Corporation, and REC Limited, provide capital gains tax exemptions to investors. 

To safeguard investors, OBPPs will be required to disclose key features of these instruments, including eligible issuers, lock-in periods, investment limits, non-transferability, and associated tax benefits. 

Additionally, platforms must carry a clear disclaimer stating that these are specialised tax-saving instruments and that investor grievances will not fall under Sebi’s jurisdiction, but must be addressed directly to the issuers. 

Compliance norms to be aligned 

In a move aimed at regulatory uniformity, Sebi has proposed aligning compliance officer requirements for OBPPs with those applicable to stockbrokers. This would replace the current mandate of appointing a company secretary with a broader framework under the Sebi (Stock Brokers) Regulations, 2026. 

The proposal follows industry representations, including from the Institute of Chartered Accountants of India, seeking greater flexibility in appointing compliance officers and harmonisation across regulatory regimes. 

The consultation paper forms part of Sebi’s broader effort to streamline regulations governing OBPPs and enhance operational efficiency in the bond market ecosystem. The regulator has invited public comments on the proposals until May 26.