India’s Bond Market: The Need for Easier Navigation and Streamlining
India doesn't have a bond shortage. It has ₹59 trillion in outstanding corporate bonds, up from ₹17.5 trillion a decade ago, growing at roughly 12% a year. The capital is there. What is missing is the plumbing to move it. This distinction sounds small. It is not. "Illiquid" implies scarcity, where there simply isn't enough to trade. "Friction-filled" implies something fixable. The supply exists, but the connection between buyers and sellers leaks at every joint. And the SEBI data makes the second case, not the first: only around 700 issuers tap the bond market out of more than 5,900 listed companies. The money is sitting there. The pathways to move it are broken.
Where the friction actually lives
Three sources do most of the damage. None of them is a supply problem.
The first is the process. Buying a bond has historically taken more steps, more paperwork, and more patience than buying an equity share, even though a bond is arguably the simpler instrument to understand. Every extra step is a place where time leaks and confidence drains. You don't lose investors because the asset is bad. You lose them at step four of seven.
The second is secondary-market liquidity. Not whether bonds exist, but whether you can sell the one you hold without taking a painful discount. Here is the number that makes the point even better: Indian corporate bonds trade roughly ₹1.4 lakh crore in a month. Equities trade about that much in a single day. Most bonds in India are bought and held to maturity, so on any given day, very few are changing hands. For a retail investor who might need to exit early, thin trading turns a sound asset into an uncertain one.
The third is accessibility, and this is where the market was most rigid for the longest. High minimum ticket sizes, opaque pricing, and a discovery process built for desks, not individuals. The result speaks for itself: retail investors hold under 5% of the corporate bond market. The rest sits with banks, mutual funds, insurers, pension funds, and foreign portfolio investors.
Infrastructure beats supply
The instinctive fix for a small market is to grow it by issuing more, listing more, and expanding the universe. But pumping more bonds into a market with broken plumbing just creates more instruments nobody can trade.
The work that actually matters is quieter: standardise settlement, narrow the bid-ask spread, centralise disclosure, and make pricing transparent enough that a first-time investor and a seasoned trading desk see the same number on the same bond.
A bond you can buy in minutes, price with confidence, and sell when you choose is worth more to this market than a dozen new issues nobody can move. Infrastructure is the binding constraint. Supply never has seen.
The regulator is already aiming at the right target
What's encouraging is that the recent regulatory direction has gone after friction, not volume. The Online Bond Platform Provider framework pulled bond discovery and purchase into an interface that looks and feels like buying a stock. SEBI's Bond Central initiative is pooling pricing and issuer information into one transparent place, so price discovery stops being a phone-call business. Market-making frameworks are being pushed to keep two-way quotes alive, someone always standing ready to both buy and sell, which is what tightens spreads. SEBI cut the minimum ticket on privately placed bonds to ₹10,000 from ₹1 lakh, which does more for access in one line than years of awareness campaigns.
SEBI is also working with the RBI on credit bond indices and the derivatives built on them, tools that let investors hedge and benchmark exposure instead of being stuck holding one illiquid line they can't get out of.
Each of these addresses a specific point of friction. Together, they start converting a held-to-maturity market into one you can actually trade.
What it means if you are not an institution
For the individual investor, the payoff is simple. A transparent, accessible bond market gives Indian savers something they have never had: a credible middle ground between the fixed, modest return of a deposit and the swings of equity.
Until recently, corporate bonds offered yields from roughly 7% into the double digits, depending on credit quality. But a yield is only usable if you can enter at a fair price and exit without a penalty. Strip out the friction, and that return finally becomes something a normal portfolio can hold. Keep the friction falling and fixed income stops being an institutional preserve. It becomes a building block anyone can use.
The bonds were always there. We are finally building the market around them, and friction, unlike scarcity, is a problem you can engineer away.
