Online bond platform providers suggested insurance-like investment structures for debt securities to enable non-institutional investors to participate in corporate bond repos to further encourage broader investment.
The suggestions were outlined during a panel discussion on Thursday at the Global Fintech Fest, moderated by Maninder Cheema, executive director at the Securities and Exchange Board of India. Panelists included Aditi Mittal of IndiaBonds, Ajinkya Kulkarni of Wint Wealth, Harish Reddy of Stable Broking, and Nikhil Aggarwal of Grip Invest.
“I think the concept similar to the DICGC insurance on bonds could also be immensely helpful. For instance, because there are a bunch of users who do not gradually move on to bonds, but some concept by insurance might encourage them. We help them diversify also,” said Reddy.
“We mentioned that even Rs 10,000 would help them. It can be diversified across 20-30 issuers. Therefore, the risk for the users goes down,” he added. “If there is a universal premium applied on the issuers, I think the premium can come down to as low as 20-50 basis points and they would benefit from a lower cost.”
Agreeing to that Aditi Mittal, said that this could be a habit an issuer can follow when they want to come up with an issuance for non-institutional investors. “Even a little issuer contribution will go long for the non-institutional investor.”
Mittal also suggested opening corporate bond repos to non-institutional investors, where they can borrow against debt securities. “If these steps can be taken into consideration, we can have two-fold liquidity, market-making, OBPP platforms, are providing a buy and sell, and this platform, which is regulated by Sebi, can provide liquidity for people….”
Panelists also highlighted the need to improve awareness of risks in high-yield bonds. Sebi is proposing a risk-o-meter that uses colour coding to link credit ratings, yields and risk. This will help retail investors to better understand higher yield bonds and risk associated with it.