SEBI Reduces Minimum Debt Investment to Rs 10,000 for Retail Investors

The Securities and Exchange Board of India (SEBI) has significantly reduced the ticket size or face value of debt securities from Rs 1 lakh to Rs 10,000. This change aims to boost retail investor participation in the corporate bond market.

Market Impact

Market participants have long desired a lower ticket size for debt securities, which would encourage more non-institutional investors to join the corporate bond market, thereby enhancing liquidity. The lower face value makes these securities more accessible to small investors who previously might have been excluded due to the high entry barrier. This move is expected to lead to a more vibrant and dynamic bond market, with increased trading activity and better price discovery. According to SEBI, companies can now issue debt securities or non-convertible redeemable preference shares on a private placement basis at a face value of Rs 10,000. This change aligns with global practices where smaller denominations are common, further integrating the Indian bond market with international standards.

Previous reduction of face value

In October 2022, SEBI had previously reduced the face value of corporate bonds from Rs 10 lakh to Rs 1 lakh. This earlier reduction had already begun to open the bond market to more participants, and the further reduction to Rs 10,000 continues this trend. The step-wise reduction in face value indicates SEBI’s commitment to making the bond market more inclusive. Comparing this to global markets, countries with mature bond markets often have lower denomination bonds, making them accessible to a larger population. 

Conclusion: This reduction in the face value of debt securities from Rs 1 lakh to Rs 10,000 is expected to make the corporate bond market more accessible to retail investors, increasing participation and liquidity. With more retail investors entering the market, there could be greater demand for corporate bonds, potentially lowering the cost of capital for companies.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.