In one of the biggest reforms for the bonds market in India, capital market regulator SEBI has given its go-ahead to a proposal to cut the minimum ticket size of bond investments to Rs 10,000 from Rs 1 lakh.

The move will boost retail participation in the Indian bond market as so far 99% of the bonds had a minimum ticket size of Rs 1 lakh. The ticket size of Rs 1 lakh made this asset class out of reach for most of the investors.

In its board meeting on Tuesday, the Securities and Exchange Board of India (SEBI) approved this proposal to reduce the ticket size for bond investments to only Rs 10,000, marking a significant milestone in mainstreaming investments into this asset class.

“To enhance participation of non-institutional investors in the bond market while safeguarding the interest of such investors, the board approved the proposal to provide an option to the issuers to issue NCDs or NCRPS through private placement mode at a reduced face value of Rs 10,000 along with the requirement to appoint a merchant banker. Such NCDs and NCRPS shall be plain vanilla, interest/dividend bearing instruments. However, credit enhancements shall be permitted in such instruments,” the regulator said in a release post board meeting.

Also Read: 9.7% interest rate: This debt instrument beats all high-return fixed deposits

On SEBI’s move, Vishal Goenka, Co-Founder of IndiaBonds.com, said, the regulator’s board has approved “reduction in face value of private placed debt to Rs 10,000 from current Rs 1 lakh, subject to appointment of merchant banker. As more than 90% of issued corporate debt is privately placed, this will accelerate the retailisation of the corporate bond markets due to reduction in investment minimum size”.

In the board meeting, the regulator approved several other forward-looking proposals with regard to regulations.

Standardization of the record date for identifying eligible holders

In order to address the inconsistencies relating to fixation of record dates and to bring uniformity and standardization in terms of market practice followed by various issuers, the SEBI board approved the proposal that record date for the payment of interest (or dividend)/ repayment of principal of debt securities/ non-convertible redeemable preference shares shall be 15 days prior to the due dates of such payment obligation.

“Standardisation of record date to 15 days prior to any interest payment or redemption date. Currently, there exists cumbersome admin for identifying and communication record dates to investors as there is a large variance in practices. Standardising this period streamlines the industry, provides clarity to investors and makes the bond markets more efficient,” Goenka said.

Disclosure of financial statements via QR code or weblink

Digitisation of the fixed income industry will help in fast information dissemination and also increase efficiencies in listing of debt.

“Overall, very progressive steps taken from the discussion white paper that was issued a few months back by SEBI. We hope for continued standardization and financial infrastructure streamlining to facilitate bond investments from the entire investor community at large,” said Goenka.