The Securities and Exchange Board of India (Sebi) has proposed allowing online bond platform providers (OBPPs) to expand operations in GIFT International Financial Services Centre (IFSC), widening their access to global debt markets. According to reports from Mint, The Economic Times, and The Indian Awaaz, the regulator issued a consultation paper on Tuesday following a request from the International Financial Services Centres Authority (IFSCA) to permit OBPPs to offer overseas-listed debt securities under a framework regulated by the GIFT City authority. Currently, OBPPs can offer products or securities regulated by financial sector regulators such as Sebi, Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India (Irdai), and Pension Fund Regulatory and Development Authority (PFRDA). However, there is no provision to permit OBPPs to offer products or securities regulated by IFSCA, creating a regulatory gap that the proposal aims to address. The proposal was officially released through a consultation paper issued by Sebi on May 5, 2026, with the consultation process remaining open until May 26, 2026.
At present, Sebi allows stockbrokers to undertake securities market activities in GIFT City through a separate business unit or a subsidiary. As reported by Mint, OBPPs, though registered as stockbrokers in the debt segment, are not explicitly permitted to offer IFSCA-regulated products. The proposal seeks to align OBPP operations with those of stockbrokers, subject to compliance with foreign exchange rules, including overseas investment limits under the Liberalised Remittance Scheme. OBPPs would offer products, securities, or services regulated by IFSCA in the manner specified for Sebi-registered stock brokers operating within the GIFT-IFSC, ensuring consistent regulatory treatment across different types of market participants. Currently, SEBI-registered stock brokers can operate in International Financial Services Centres after obtaining registration from IFSCA, while online bond platforms are currently not permitted to distribute products regulated by the authority.
Sebi has proposed allowing OBPPs to offer tax-saving bonds issued under Section 54EC of the Income Tax Act, as well as under Section 85 of the proposed Income-tax Act, 2025. According to the proposal reported by Mint, The Economic Times, and The Indian Awaaz, these bonds, issued by government-notified entities such as Power Finance Corporation, Indian Railways Finance Corporation, REC, and REC Ltd, are currently exempt from mandatory listing requirements, creating ambiguity over their availability on online bond platforms. OBPPs must disclose key features of 54EC bonds, including eligible issuers, lock-in period, investment limits, non-transferability, and tax benefits, and carry a clear disclaimer stating that these are specific tax-saving instruments and that investor grievances related to such bonds will not fall under Sebi's purview, but must instead be addressed to the issuer. The changes are intended to widen product availability for investors using regulated online bond platforms, with online bond platforms having witnessed increased investor participation in recent years, particularly in fixed-income products such as corporate bonds, government securities and debt instruments.
Sebi has suggested easing norms for appointing compliance officers by aligning requirements with stockbroker rules. As reported by Mint, The Economic Times, and The Indian Awaaz, currently OBPPs are required to appoint a company secretary, a condition not uniformly applicable to stockbrokers. Following representations from the Institute of Chartered Accountants of India (ICAI), the regulator has proposed replacing the current mandate with a broader framework under the Sebi (Stock Brokers) Regulations, 2026, allowing OBPPs to appoint compliance officers based on broader eligibility criteria rather than restricting the role to company secretaries. The move represents a significant step toward greater uniformity across regulatory frameworks and operational efficiency in the bond market ecosystem.
Sebi has invited feedback on the consultation paper until May 26, 2026, according to reports from Mint, The Economic Times, and The Indian Awaaz. The proposals are part of Sebi's broader effort to streamline regulations governing OBPPs and improve operational efficiency in the bond market ecosystem. The consultation process follows representations from various stakeholders, including ICAI, seeking flexibility in compliance officer appointments and greater uniformity across regulatory frameworks, ensuring that online bond platforms can operate with consistent regulatory standards across different jurisdictions. The proposal comes as regulators continue to expand the product ecosystem within GIFT City and increase participation in India's debt markets through regulated digital investment platforms, with the move aimed at expanding investment opportunities for domestic investors and strengthening GIFT City's position as a global financial centre.
