The Securities and Exchange Board of India (Sebi), in coordination with the Reserve Bank of India (RBI), is working on introducing derivatives linked to corporate bond indices as part of efforts to deepen the domestic debt market.
“A working group is sorting out operational details to introduce a market-making framework to improve liquidity in the corporate bond market,” Sebi Chairman Tuhin Kanta Pandey said on Monday at the ICICI Securities India Investor Conference.
Pandey said the domestic debt market is likely to attract higher capital inflows, aided by recent policy measures including the exemption of capital gains tax for foreign portfolio investors (FPIs) on government securities (G-Secs) and the removal of certain investment restrictions in corporate debt.
Last week, the government announced a series of measures to encourage greater FPI participation in the G-Sec market amid moderating inflows and intermittent outflows. These included the removal of the 20 % tax on interest income from G-Secs, the 12.5 % long-term capital gains tax, and the 30% short-term capital gains tax applicable to FPI investments from FY27. As of May 12, FPI holdings in G-Secs through both the general and fully accessible routes stood at ₹3.75 lakh crore.
To address temporary intra-day liquidity mismatches faced by mutual funds, Sebi has proposed a more practical framework allowing intra-day borrowing, Pandey said. Mutual funds often encounter timing mismatches between redemption payouts and incoming investment flows and rely on short-term borrowings from banks and financial institutions to bridge such gaps.
The regulator is also examining changes to the pre-open call auction mechanism for initial public offerings (IPOs) and relisted shares to improve price discovery and ensure orderly market openings. Last month, Sebi issued a consultation paper after receiving feedback on suppressed price discovery and excessive volatility on listing days. The proposed framework seeks to enable faster and automatic expansion of price bands in response to strong investor demand, reducing the need for manual intervention by stock exchanges.
In addition, Sebi is considering easing compliance requirements for research analysts, including call-recording obligations during institutional interactions. For stockbrokers, the regulator is reviewing variable net-worth requirements so that capital norms better reflect operational scale and risk exposure.
Rajesh Exports case
Responding to questions on Sebi’s recent ex-parte interim order against Rajesh Exports, Pandey declined to comment on the specifics of the case.
“As a matter of principle, on individual cases, we don’t really comment to the media. This is a quasi-judicial process in which orders are issued. They have to be complied with or challenged in the manner provided under law,” he said.
Shares of Rajesh Exports hit the 5 % lower circuit for a third consecutive session on Monday after Sebi’s action against the company over alleged inflation of revenue disclosures amounting to ₹15 lakh crore during FY21-FY25.
The regulator has also alleged that the company falsely claimed investments in an African gold mine, that Chairman Rajesh Mehta interfered with the audit committee’s functioning, that financial statements were misrepresented in annual reports, and that both the company and Mehta failed to cooperate during the initial stages of the investigation.
