In a move aimed at increasing retail participation in the debt market through public issues, the Securities and Exchange Board of India (Sebi) has proposed incentives for certain categories of retail investors and reduced compliance burden.
The incentives proposed in a consultation paper issued on Monday include sops in the form of higher coupon rate or a discount to the issue price to allottees such as senior citizens, women, armed forces personnel as well as retail subscribers.
Sebi’s analysis of recent data on public issuance of non-convertible debentures showed that the amount raised via such issues dropped drastically in FY2025 compared to the previous year. The regulator has sought public comments on the proposal by November 17.
The regulator has also proposed a series of relaxations to ease the compliance burden for companies that have only listed their debt securities by revising the definition of corporate high-value debt listed entities (HVDLEs), and exempting smaller issuers from stringent corporate governance and related party transaction (RPT) requirements.
Currently, entities with listed non-convertible debt securities outstanding of Rs 1,000 crore or more are classified as HVDLEs and must comply with several corporate governance norms similar to listed equities. Sebi has now proposed to raise this threshold to Rs 5,000 crore, aligning the norm with the scale and risk of the issuer in a move to encourage more entities to tap the bond market without being deterred by compliance costs.
Sebi’s consultation paper said, “Subsequent to the above-mentioned proposed threshold, the number of HVDLEs will reduce from 137 to 48 entities (effectively reducing around 64% entities from the current threshold), leading to ease of doing business (EODB).”
The other key proposal includes replacing the term “income” with “turnover” in defining material subsidiaries to ensure consistency in financial terminology. Sebi also clarified that shareholder approval via special resolution will be required before a non-executive director crosses 75 years of age. Time taken for statutory or regulatory clearances will be excluded from the period for obtaining shareholder approval for director appointments or reappointments.
Further, nominee directors of financial regulators or those appointed by courts or tribunals will be exempted from such approval. Sebi has suggested omitting the current rule that mandates filling a vacancy caused by the resignation or removal of an independent director within three months. Under the revised proposal, if an HVDLE continues to meet the minimum requirement for independent directors on its board even after such a vacancy arises, it will not be required to appoint a replacement. The move aims to offer flexibility to debt-listed entities and align their obligations with the principle of proportional compliance already extended to equity-listed companies.
Other proposals include flexibility in compliance report timelines, removing the need to disclose related party transactions in quarterly reports and introducing norms for appointment and removal of secretarial auditors. Sebi also plans to harmonize related party transaction rules with those for equity-listed firms while retaining safeguards for debenture holders.
Sebi has also proposed to remove the requirement to disclose material related party transactions in their periodic compliance reports. The regulator said such disclosures are already captured in the half-yearly related party transaction reports, similar to the practice followed for equity-listed companies. The change aims to avoid duplication of reporting and streamline compliance requirements for debt-listed entities.
