Summary of this article
Sebi has proposed to allow debt issuers to offer higher coupon rates or discounts to women, senior citizens, armed forces personnel, and retail investors
The incentives will be optional for issuers, must be disclosed upfront, and apply only to original allottees
The proposal aims to improve retail participation in the bond market as public debt issuances have fallen sharply
In a bid to improve retail participation in the corporate bond market, the Securities and Exchange Board of India (Sebi) on October 27 proposed to allow debt issuers to offer incentives such as higher coupon rates or discounts on issue price to select categories of investors such as women, senior citizens, armed forces personnel, and retail subscribers.
Currently, Regulation 31 of the NCS Regulations prohibits any person connected with an issue from offering incentives “whether direct or indirect, in any manner, whether in cash or kind or services or otherwise,” except for fees or commissions for services rendered.
Sebi has invited public comments by November 17, 2025 on whether issuers should be allowed to offer such incentives and which investor categories should be eligible.
What Sebi Has Proposed
Sebi, in a consultation paper dated October 27, 2025, proposed that issuers should be allowed to offer higher coupon rates or discounts to certain investor groups such as senior citizens, women, armed forces personnel, including serving members, ex-servicemen, and widows of ex-servicemen, and retail investors. The decision to offer such incentives would rest with the issuer but are required to be clearly disclosed in the offer document, the regulator added.
Sebi, however, clarified that “the higher coupon rate shall be available only to the initial allottee and shall not be available in case the bonds are transferred or transmitted.”
Why Sebi Is Reviewing The Rule
Industry participants, during discussions with Sebi, suggested that allowing certain incentives could make debt securities more attractive to small investors, who often prefer safer, interest-bearing instruments.
After consultations, Sebi said offering such incentives to senior citizens, women, and armed forces personnel could make debt securities more competitive, boost their participation, and help increase overall retail involvement in the bond market.
Sebi said this will also provide a fillip to the number of public issuances in the debt market. According to Sebi’s latest annual report, the amount of public debt issues has reduced from Rs 19,168 crore in FY24 to Rs. 8,149 crore in FY25, which the regulator said, “further emphasises the need to increase retail participation in debt market through public issuance mode.”
Similar Practices Already In Place
The regulator noted that similar practices already exist in other parts of the financial system. For instance, banks offer higher interest rates on fixed deposits (FDs) to senior citizens, while NBFCs extend higher rates on FDs to women depositors.
In equity markets, in the case of an offer-for-sale (OFS) of shares, Sebi already allows promoters to give discounts to retail investors. Further, armed forces personnel also receive financial incentives such as discounts on domestic air travel through various Indian airlines and travel portals.
