Securities and Exchange Board of India (SEBI) is proposing new incentives to boost retail participation in public issues of debt securities, offering higher coupon rates or discounts for senior citizens, women, armed-forces personnel and other retail categories.
While this policy aims to revive the debt market’s ailing issuance levels – which fell to around ₹81.5 billion in FY25 from ₹191.7 billion in FY24 – the move is raising caution among experts.
The key viewpoint: Sweetened yield-incentives can be tempting, but they come with underlying risks. First, discounted pricing or higher coupons might mask credit-quality dangers, especially if issuers are weaker. Second, increased accessibility may push unsophisticated retail investors into securities without full understanding of underlying risk. Third, if yields get too attractive relative to risk, the regulatory intervention could distort the usual trade-off between return and default risk.
In short, while the effort to expand retail access to debt markets is commendable, the design must ensure adequate disclosure, credit-risk awareness, and market discipline, otherwise the very incentives meant to deepen the market could inadvertently lead to poor outcomes for less-informed investors.
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