India’s bond market does not need more education, it needs better products

Introduction

We believe the path to a mass bond market in India will run as much through better products as through investor education. Indians hold ₹269 lakh crore* in bank deposits and roughly ₹55 lakh crore** in corporate bonds. In our view, that gap can narrow as investing in bonds becomes simpler, while investors continue to understand the ratings, risks and terms of what they hold.

That gap is the whole story: deposits have reached population scale, and bonds have not, at least not yet. I spend most of my working hours inside this market, and one question keeps returning: what bond investing could look like if it became as familiar as a savings account. The aim is broader retail participation in bonds, at population scale.

What follows is my best answer. It is more of a prediction than a plan. It includes four steps: the current state of the market, a possible end state for the market , the first moves which are already visible , and the areas I am least sure of. Parts of it might be wrong, and I will share those parts at the end.

*Bank deposits as of August 2026, based on RBI data.

**Outstanding corporate bond market as of March 2026, based on SEBI data.

Where we are today

The Indian bond market has historically been a wholesale market with a significantly narrow retail entrance.

Hence, the entry point has always mattered. SEBI cut the face value of privately placed debt to ₹10,000 in 2024; online bond platforms have been regulated by SEBI since 2022, and demat accounts crossed 20 crore in 2025*. , NSE’s registered unique investor base also crossed 13 crore in 2026*. Together, these developments have made it easier for retail investors to access the market.

*The demat account and unique-investor figures refer to their respective reported periods and are different population measures.

What retail finds inside, though, is still a wholesale product: you pick an ISIN, read a rating, and hold to maturity, and exiting before maturity depends on finding a buyer in the secondary market, which is not assured. Every one of those steps is a place where an ordinary person stops. On the contrary, a deposit asks much less of you. . You don’t pick a borrower. The bank pools your money, lends it across thousands of loans, absorbs defaults from its own capital, gives you liquidity on demand, and the RBI stands behind the whole thing with CRR, SLR, a liquidity window and DICGC insurance up to ₹5 lakh per depositor, per bank, subject to applicable conditions.

Mutual funds already ran this playbook for equity. Industry AUM stood at ₹73.7 lakh crore at the end of FY26*, with 0.97 crore contributing SIP accounts and monthly SIP contributions of ₹32,087 crore in March 2026.

*Mutual fund and SIP figures are based on AMFI data for the respective period.

In my view, Equity did not reach every household because people learned to read balance sheets; it reached them when investing became a monthly debit.

Bonds will follow the same logic. However, the product has to do the work, and not the investor.

How a bond becomes a deposit - in six layers

1. The wallet: In this model, an investor could open an account, add money and have it invested from the moment it lands, without having to choose individual ISINs or track coupon calendars. The wallet becomes the interface. Instead of asking an investor to understand the mechanics of every individual bond, the product could translate those mechanics into a simpler experience while still showing the investor what they own and the risks attached to it.

2. Tokenization: This is a possible enabling layer that makes everything above it possible. In this model, a ₹50,000 investment could be split into fractional units spread across hundreds, and eventually thousands, of underlying bonds, so that a bond with a ₹10,000 face value could become divisible into much smaller amounts. None of this is purely theoretical anymore. : In September 2026, SEBI’s Executive Director Manoj Kumar said bond tokenisation was work in progress at the regulator, and RBI and SEBI launched a tokenised corporate bond pilot focused on settlement*. *This refers to regulatory developments and the tokenised corporate bond pilot announced in September 2026; it does not imply that the proposed fractionalised retail bond-wallet model currently exists. Whether this ultimately lands as a distributed ledger or as smarter depository plumbing matters far less than the outcome it could deliver: exposure that can potentially be sliced and moved at retail size. Whether it ultimately lands as a distributed ledger or as smarter depository plumbing matters far less than the outcome it could deliver; exposure that can be sliced and moved at retail size.

3. Baskets, and the people who build them: Bond Managers construct the portfolio and build baskets to a stated risk profile and target, whether conservative, balanced or higher-risk , so that what you choose is a risk return profile rather than an individual security. Spread across a thousand issuers, a single default barely registers, and the return holds up in aggregate. This is conceptually similar to how a bank diversifies its loan book. The difference is that a bank absorbs losses from its own capital, whereas a basket investor bears them directly. In return, holdings would be visible to the investor, who could potentially earn part of the spread a bank would otherwise retain.

4. Compounding by default: Instead of being credited to a savings account, coupons could be reinvested into more units the same day. The wallet could then compound over time, similar to a growth-option fund, subject to the performance of the underlying bonds and applicable taxes. The important part is not the mechanics of compounding. It is removing another decision from the investor.

5. Institutions on the other side of the trade: A regulatory push could bring banks, insurers, pension funds and mutual funds onto the same venues where retail trades. That could improve market liquidity - not a market maker on one side, but real two-way flow. Today secondary liquidity in corporate bonds is concentrated in a small set of ISINs. At population scale, the retail pool itself could become large enough that institutions want to trade against it. That is when the market starts behaving differently.

6. Bank-grade protection: Once the retail bond pool is large enough to matter for financial stability, regulators may consider measures similar to those that exist for deposits, such as - insurance on the retail layer, liquidity backstops, and reserve requirements on whoever runs the baskets, effectively a CRR for bond wallets. This will happen not because regulators have warmed to the idea, but because a ₹20 lakh crore retail bond pool left without a liquidity backstop is a run waiting to happen. Protection has historically evolved alongside scale, and it is reasonable to ask whether something similar could happen here.

That is the end state I am imagining: a wallet that behaves like a simple savings interface, while the underlying exposure is still priced and carries the risks of bonds.

The first steps are already visible

• 2022: Online bond platforms brought under SEBI regulation as debt-segment brokers.

• 2024: Minimum face value of certain privately placed debt securities cut to ₹10,000.

• August 14, 2026: OBPP framework widened again. Platforms can now also offer IFSCA-regulated products and Section 54EC / Section 85 capital gains bonds, adding to G-Secs, T-bills, securitised debt and other products permitted earlier. The spectrum keeps growing.

• August 2026: A stricter advertisement code proposed for bond platforms. Regulators do not tighten ad rules for channels they expect to stay small.

• September , 2026: Tokenization confirmed as work in progress; RBI and SEBI launched a tokenised corporate bond pilot focused on settlement*

*This refers to the September 2026 regulatory and pilot developments and does not imply that tokenised retail bond investing is currently available at population scale.

Layer on top of CRISIL Ratings’ projection that the corporate bond market could grow to ₹100–120 lakh crore by FY30* alongside bank deposits of around ₹269 lakh crore* and the continued growth of the deposit base.

CRISIL Ratings made this projection in December 2023. It is a projection for FY30, not the current size of the corporate bond market.

In our view, the supply side may not be the main constraint.

The bigger constraint may be the market infrastructure and the product experience around it.

A few things I am not sure about

1. Sequencing: The open question is whether liquidity comes before institutions show up, or after. Both depend on each other with regard to participation, and which one moves first is still unsettled. Retail participation can create liquidity. But institutions can also create the depth that attracts retail participation.

2. Who the basket managers are: Debt mutual funds already exist, and they pool, diversify and compound, so in one sense the third layer is built. Yet, they have not reached households to the same extent as equity SIPs , and our read is that a fund is simply not a wallet: it comes with NAV cut-offs, exit loads, tax treatment and the basic fact that you have to actively choose it. The end state would need the wallet to be the default rather than a scheme the investor picks, and what we are still working out is how much of that gap is a product problem and how much is only a distribution one.

3. Timing: My instinct says seven to ten years, and this is a personal estimate. . Every timeline we have put on this market has underestimated how fast regulation would move and overestimated how quickly the behaviour would change.

Bonds can reach population scale when investing in them becomes simpler, while investors continue to understand what they own and the risks involved. That is the direction we are building BondScanner towards.