New Delhi

The Securities and Exchange Board of India's Chairman, Tuhin Kanta Pandey said on Monday that the regulator is collaborating closely with the Reserve Bank of India to introduce derivatives on corporate bond indices, a move aimed at improving liquidity, price discovery and access for global capital in India's debt market.

"Additionally, SEBI and RBI are working together to introduce derivatives on corporate bond indices," Pandey said in his keynote at ICICI Securities India Investor Confidence event. He linked the initiative to broader reforms in the corporate bond market architecture. The electronic book provider platform has already been expanded to include issuances by REITs and InvITs, improving transparency and efficiency. A working group is also sorting out operational details to introduce a market-making framework to improve liquidity in corporate bonds.

The RBI has already laid the groundwork. Pandey noted that RBI gave draft guidelines on total return swaps and derivatives on corporate bond indices in February, and is now finalizing them. "RBI is in the process of finalizing these guidelines, following which the exchanges will be launching these derivative products on bond indices," he said. The joint SEBI-RBI effort is part of a wider push to make India's bond market more investable for domestic and foreign investors.

On foreign investor access, Pandey said SEBI has eased regulatory requirements for FPIs investing in government securities and simplified processes through standardized forms, digital signature-based document submission and tracking mechanisms. "We are working with custodian banks and RBI for a further substantial reduction in the timelines for FPI registration and onboarding," he said. Operational efficiency will improve through measures like net settlement of funds to reduce cost and friction.

Policy measures are complementing market structure reforms. Pandey highlighted latest tax exemptions for FPIs on government securities and removal of certain investment limits in corporate debt as steps to facilitate capital flows into the debt market. Enhancements to closing auctions and block deal frameworks have also improved price discovery and liquidity, "especially meeting the concerns of the FPIs."

READ MORE: Syeda Saiyidin Hameed reached top positions despite her activism

The Chairman framed these steps under SEBI's "optimum regulation" approach -- protecting investors and market integrity while enabling growth. With corporate bond issuances exceeding Rs 9 trillion in FY26 and market cap at 128% of GDP, he said derivatives on bond indices will give investors better tools to hedge and allocate. Combined with reforms for stockbrokers, AIFs and mutual funds, the SEBI-RBI collaboration on bond index derivatives is meant to reduce friction and build trust so that "growth becomes investable only when access is simple, processes are predictable and markets function smoothly."