Regulator Expands the Scope of Online Bond Platforms

The bond market is gradually becoming more accessible to retail investors, and a recent move by the regulator could make online bond platforms even more useful.

The regulator has expanded the scope of products that can be offered through Online Bond Platform Providers (OBPPs). Under the new framework, these platforms can offer certain products and securities regulated by the International Financial Services Centres Authority (IFSCA), along with specified tax-saving bonds.

What has changed?

Online bond platforms have primarily focused on providing investors access to eligible debt securities through digital channels. With the latest change, the range of products that can potentially be offered on these platforms has become broader.

The key additions include:

• IFSCA-regulated products and securities: OBPPs can now offer eligible products, securities and services regulated by IFSCA, subject to applicable regulations.
• Tax-saving bonds: Certain bonds issued under provisions such as Section 54EC of the Income Tax Act can also be offered through online bond platforms.
• Greater product choice: The move could give investors access to a wider range of fixed-income opportunities through digital platforms.
• The regulator's move follows requests from IFSCA and is aimed at improving ease of doing business while bringing greater clarity to the products that online bond platforms can offer.

What are IFSCA-regulated products?

IFSCA is the regulator for financial products and services offered through India's International Financial Services Centre, including GIFT City.

Allowing eligible IFSCA-regulated products on online bond platforms could make it easier for investors to access opportunities linked to the international financial ecosystem without relying solely on traditional channels.

However, such investments remain subject to the applicable regulatory framework, including requirements under FEMA and the Liberalised Remittance Scheme (LRS), wherever relevant.

Tax-saving bonds get a digital route:

Another important part of the development is the inclusion of specified tax-saving bonds.

The regulator has allowed OBPPs to offer bonds issued under Section 54EC of the Income Tax Act, along with relevant provisions under the proposed Income-tax Act, 2025. Section 54EC bonds are issued by government-notified entities and are designed to provide eligible investors with capital gains tax benefits, subject to the applicable conditions.

For investors, having such products available through online platforms could make the process of discovering and comparing eligible fixed-income options more convenient.

At the same time, tax-saving bonds come with specific conditions such as lock-in periods, investment limits and restrictions on transferability. Investors should understand these conditions before making a decision.

What does this mean for retail investors?

The broader scope of online bond platforms can make the fixed-income market more accessible and easier to navigate.

For retail investors, the development could mean:

More choice: A wider set of eligible bond products may become available through digital platforms.

Greater convenience: Investors can discover and evaluate fixed-income opportunities online instead of depending entirely on offline channels.

Access to new segments: IFSCA-regulated products could bring eligible opportunities connected with India's international financial centre into the online bond ecosystem.

Better visibility of tax-saving options: Specified tax-saving bonds could become easier to discover through online platforms.

But more choice also means the need for better understanding. Investors should look beyond the headline interest rate and consider the issuer's credit quality, maturity, liquidity, taxation, repayment structure and other terms before investing.

A step towards a wider digital bond market-

The regulator's latest move reflects the broader evolution of India's bond market. As more investors look for alternatives to traditional savings and market-linked investments, digital platforms can play an important role in making fixed-income products easier to access and understand.

The inclusion of IFSCA-regulated products and specified tax-saving bonds is another step towards expanding the range of products available through online bond platforms.

For investors, the important takeaway is simple: the online bond market is evolving, and the range of opportunities available through regulated platforms could continue to grow.

What investors should keep in mind-

Before investing in any bond, investors should evaluate the credit rating, issuer strength, yield, maturity, liquidity, taxation and associated risks. A higher interest rate does not automatically mean a better investment.

As the bond market expands, informed decision-making will remain just as important as access.

Source: Economic Times; regulatory developments.

https://economictimes.indiatimes.com/markets/bonds/sebi-broadens-scope-of-online-bond-platforms-permits-ifsca-regulated-products-and-tax-saving-bonds/articleshow/133245588.cms

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Disclaimer:

JM Financial Services Ltd. | Corporate Identity Number: U67120MH1998PLC115415 | For registration details and disclaimer, please visit http://www.jmfinancialservices.in.

Fixed returns do not constitute guaranteed or assured returns. Investments in corporate debt securities, municipal debt securities/securitised debt instruments are subject to credit risks, market risks and default risks, including delay and/or default in payment. Read all the offer-related documents carefully. The securities are quoted as an example and not as a recommendation. Investments in debt securities, municipal debt securities/securitised debt instruments are subject to risks, including delay and/or default in payment. Read all the offer-related documents carefully. Investments in the securities market are subject to market risks; read all the related documents carefully before investing.

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