Source: Mint
Context:
The Securities and Exchange Board of India (SEBI) has proposed measures to encourage retail participation in public debt markets by allowing issuers to offer special incentives to select investor groups.
Key Highlights:
- Proposal Details:
- Issuers may provide incentives such as:
- Higher coupon rates
- Discounts on issue price
- Targeted investor groups:
- Senior citizens
- Women investors
- Armed forces personnel
- Retail subscribers
- Issuers may provide incentives such as:
- Rationale:
- Public debt issuance in India has declined sharply
- Retail participation has traditionally been low due to:
- Lower returns
- Lack of familiarity
- Perceived complexity
- Historical Context:
- In 2024, SEBI allowed discounts for retail investors in Offers for Sale (OFS), showing precedent for incentivization.
- Expected Impact:
- Encourage broader participation in corporate bonds
- Revive interest in public debt fundraising
- Potentially increase liquidity and depth in debt markets
Definitions / Key Terms:
- Corporate Bonds: Debt securities issued by companies to raise capital from investors.
- Coupon Rate: Interest rate paid by the issuer to bondholders.
- Retail Investors: Individual, non-institutional investors investing small amounts in financial markets.
- Offer for Sale (OFS): Mechanism for existing shareholders to sell shares to the public.
