The Securities and Exchange Board of India issued a consultation paper on Friday to introduce fixed income channel partners (FICPs) to distribute fixed income securities though the Online Bond Platform Providers (OBPPs).
The paper seeks to improve awareness and access to fixed income products among investors beyond major urban centres, particularly tier-II, tier-III and rural locations, by taking a model similar to mutual fund distributors. “Keeping in view the impact of MFD model, it was felt that a similar distribution framework could support the development of the fixed income securities market,” the paper said. The regulator has sought comments on the paper by September 11.
India’s corporate bond market has expanded significantly, with outstanding corporate bonds rising from around Rs 17.5 lakh crore at the end of FY15 to more than Rs 60 lakh crore as of July 31. Listed corporate bonds account for about Rs 46 lakh crore, or 76.6% of the market.
Despite this growth, the market remains primarily accessed by institutional investors. Debt issuances mobilised Rs 9.1 trillion in FY26, nearly twice the amount raised through equity, but retail participation remains relatively low, SEBI said.
Under the proposed framework, an FICP could be an individual or a non-individual entity enlisted with a recognised stock exchange and appointed by one or more OBPPs. Individuals would need to be Indian citizens aged at least 18 years, have passed Class XII, meet fit-and-proper criteria and hold a valid NISM certification for fixed-income securities.
Mutual fund distributors registered with the Association of Mutual Funds in India would also be eligible to apply as FICPs without paying the applicable enlistment fee, subject to obtaining the relevant NISM certification. FICPs would assist investors with onboarding, documentation, KYC and transactions, but would not be allowed to handle client funds or securities. Orders would have to be routed directly through the OBPP platform.
The framework also places significant responsibility on OBPPs for supervising FICPs. Platforms would have to conduct due diligence, monitor their activities, organise training, maintain client mappings and investigate suspicious activity or recurring complaints. OBPPs would also be responsible for acts and omissions of their appointed FICPs in relation to distribution activities.
To curb mis-selling, FICPs would be required to follow a code of conduct and would not be permitted to recommend products based on financial incentives. They would also be barred from aggressive sales practices and conflicts of interest.
The proposed framework would allow FICPs to earn remuneration only from the appointing OBPP, through commission sharing. The paper also said that the commissions, fee or brokerage charged to clients would be capped at a maximum of 2.5% of the value of investment. The regulator also proposed the exclusion of access to Investor Protection Fund and Settlement Guarantee Fund in case there are any grievances with the FICPs.