Online Bond Platform Providers (OBPPs) have pitched the creation of an investor protection mechanism for retail bond investors, according to reports from The Economic Times, The Financial Express, Rediff Moneynews, and The Hindu BusinessLine. The initiative would establish a fund- or insurance-like structure designed to help build confidence and encourage wider participation in the corporate bond market. Industry participants suggested small investors could be protected up to a specified limit, with proposals for a mechanism similar to deposit insurance for bank deposits. During a panel discussion at Global Fintech Fest 2026, Harish Reddy, co-founder at Stable Money, noted that a concept similar to the DICGC insurance on the bonds front could be immensely helpful, particularly for users who don't gradually move on to bonds but might be encouraged by insurance concepts. The mechanism gained additional urgency after an instance cited by Nikhil Aggarwal, founder and group CEO of Grip Invest, where an NBFC defaulted on bonds totalling around ₹150 crore after a rating downgrade and liquidity stress, affecting thousands of retail investors.
Industry participants discussed the possibility of a universal premium being charged across bond issuers, potentially linked to their credit risk, according to The Hindu BusinessLine. One participant suggested that given the relatively low default rates and secured nature of several bonds offered to retail investors, the premium could potentially be as low as 0.20-0.3%. However, recent discussions have refined these estimates further, with Harish Reddy suggesting that if there is a universal premium applied on issuers, the premium could come down to as low as 20-50 basis points. As reported by The Financial Express, Reddy explained that even ₹10,000 could help users diversify across 20-30 issuers, thereby reducing individual risk exposure. The mechanism would work better if it was applied universally rather than being optional for issuers, as voluntary participation could result in adverse selection, some stakeholders said. Such a mechanism could help investors diversify their holdings while also potentially reducing the cost of capital for issuers.
Panelists also suggested opening corporate bond repos to non-institutional investors, where they can borrow against debt securities, as reported by The Financial Express. Aditi Mittal highlighted that if these steps can be taken into consideration, they can have two-fold liquidity - market-making, OBPP platforms providing buy and sell services, and this platform, which is regulated by Sebi, can provide liquidity for people. The discussions come at a time when regulators are seeking to deepen retail participation in corporate bonds, with the Securities and Exchange Board of India (Sebi) working on measures to improve retail access, risk disclosure and the functioning of OBPPs. Institutional buyers could also provide an additional source of demand by buying bonds from retail investors seeking an exit.
Participants discussed how a growing retail investor base could improve secondary-market activity as investors have different investment horizons and liquidity requirements, as reported by The Economic Times. Ajinkya Kulkarni, co-founder at Wint Wealth, noted that fundamentally, a large number of retail investors will solve for liquidity. However, participants flagged a potential liquidity challenge when an issuer comes under stress or its rating is downgraded, as platforms may not have the ability or willingness to hold such bonds on their books. The panel highlighted the need for OBPPs to act as gatekeepers by ensuring that retail investors understand the risk associated with bonds rather than simply chasing higher yields. The discussions come at a time when regulators are seeking to deepen retail participation in corporate bonds, with Sebi working on measures to improve retail access, risk disclosure and the functioning of OBPPs.
The panel also discussed the proposed riskometer, which would use colour coding to make it easier for retail investors to understand the risk associated with different credit ratings and assess the trade-off between yield and risk, according to The Economic Times and The Financial Express. This initiative aligns with Sebi's broader efforts to improve retail access, risk disclosure and the functioning of OBPPs, including the proposed colour-coded Credit Risk-o-Meter to help investors better understand credit risk associated with debt securities. The discussions come at a time when regulators are seeking to deepen retail participation in corporate bonds, with Sebi working on measures to improve retail access, risk disclosure and the functioning of OBPPs. The regulator has also proposed a colour-coded Credit Risk-o-Meter to help investors better understand higher yield bonds and the associated risks.
