Securities and Exchange Board of India (Sebi) chairman Tuhin Kanta Pandey on Tuesday said the market regulator is working towards further developing bond exchange traded funds (ETFs) and derivatives on corporate bond indices to deepen India’s debt market ecosystem.

Speaking at the CareEdge Debt Market Summit in Mumbai today, Pandey outlined a multi-pronged roadmap to deepen India’s corporate bond market, with a focus on liquidity, market infrastructure, investor participation, technology, and municipal bonds.

He said the market-making framework announced in the Union Budget would play an important role in improving liquidity and market architecture. He said Sebi is working with market participants, the Reserve Bank of India and the Ministry of Finance to take the framework forward.

“We are working towards further developing bond ETFs and derivatives on corporate bond indices. These can improve liquidity, allow retail investors to access debt markets with smaller ticket sizes, and help institutions hedge interest-rate risks,” Pandey said.

The Sebi chief added that the regulator is also exploring a distinct regulatory classification for debt brokers, which could lower costs, reduce entry barriers, and encourage specialised debt-market intermediaries.

Pandey said Sebi would also review whether debt-only listed entities need to comply with the same level of LODR regulations applicable to equity-listed companies.

On investor participation, he stressed that retail involvement in the bond market would grow only if investors understand fixed-income products better.

“Bonds have their own vocabulary — coupon, yield, duration, rating, and different types of risks. We must make this vocabulary investor-friendly,” he said, adding that Sebi would run bond-focused awareness campaigns across India under Project Jagrook.

To widen the issuer base, Pandey said Sebi and stock exchanges would conduct outreach programmes focused on SMEs and companies that are ready to tap the listed debt market but have not yet done so.

On securitisation and technology, he said Sebi has released a consultation paper to align its securitised debt framework with the RBI’s framework for securitisation of standard assets. The aim is to simplify listing norms, streamline disclosures, and provide clarity for RBI-regulated entities.

Pandey also said Sebi is exploring a pilot project for tokenisation of corporate bonds to assess whether the technology can enable faster settlement, better traceability, automated servicing, and improved transparency.

“We must move carefully, but we must remain open to useful innovation,” he said.

The regulator is also reviewing the municipal debt securities framework to help municipal bodies finance urban infrastructure projects, enable pooled financing for multiple civic bodies, and improve retail participation in municipal bonds.

“The way ahead is not one road. It is a network of reforms — market making, municipal bonds, securitisation, bond ETFs and derivatives, tokenisation, and investor education,” Pandey said. He said that these reforms together can help build a bond market that finances India’s growth with “transparency and trust.”

“Indian households and investors are increasingly trusting capital markets for investments. In FY25, around ₹7 lakh crore of household savings flowed into the capital market and total household assets stood close to ₹141 lakh crore by the close of FY25,” he said, citing Sebi’s household savings study.

Highlighting the importance of the corporate bond market, Pandey said outstanding corporate bonds have grown from around ₹17.5 lakh crore at the end of FY15 to over ₹59 lakh crore currently, registering a compounded annual growth rate (CAGR) of around 12%. Average annual fundraising through the debt market stood at around ₹8 lakh crore during FY21 to FY25, while debt issuances in FY26 mobilised ₹9.1 lakh crore, nearly twice the amount raised through equity markets.