Beyond major urban hubs: SEBI plans distributor model to boost retail reach in corporate bonds

In a move to drive retail participation beyond major urban hubs, the capital markets regulator has proposed a structured distribution network for fixed income securities, drawing directly from the success of the mutual fund distributor ecosystem.  

The Securities and Exchange Board of India (SEBI) has released a consultation paper detailing the introduction of Fixed Income Channel Partners (FICPs).

Under the proposed framework, these channel partners will be enlisted with stock exchanges and appointed by Online Bond Platform Providers (OBPPs) to distribute permitted fixed income securities to retail investors, particularly across Tier II, Tier III, and rural regions.  

While corporate bond issuances reached ₹9.1 lakh crore in FY26, nearly double the capital raised through equity, access remains heavily skewed toward institutional investors. Although the introduction of OBPPs fueled a 546% surge in Request for Quote (RFQ) trades year-on-year, SEBI noted a persistent structural gap in reaching investors outside Tier I cities.  

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"The Mutual Fund Distributor (MFD) model has played an important role in increasing investor awareness and penetration of access to mutual fund products, particularly in Tier 2 and Tier 3 cities," SEBI observed in the paper, noting that a similar setup could bridge the divide in the bond market.  

Key highlights of the proposed FICP framework

• Enlistment and Eligibility: Individuals aged 18 and above with a 12th-standard qualification and a valid NISM-Series Fixed Income Securities Certification can apply. Registered Mutual Fund Distributors (MFDs) will be eligible to apply without paying enlistment fees, provided they pass the NISM certification. 
• Registration Validity: Enlistment with a stock exchange will remain valid for three years, subject to renewal. Stock exchanges will approve or refuse applications within 21 days. 
• Operational Scope: FICPs can onboard clients, assist with KYC and documentation, and facilitate trades through OBPP platforms. They are strictly prohibited from handling client funds or securities, issuing contract notes, or selling unsecured perpetual debt instruments like AT1 bonds. 
• Fee Structure: FICPs will receive remuneration solely through commission sharing with their appointing OBPP. They cannot charge clients directly, and the overall fee or brokerage charged to clients by OBPPs will be capped at 2.5% of the investment value. 
• Liability & Oversight: OBPPs will be held responsible for all acts of omission and commission by their appointed FICPs, including client supervision, data security monitoring, and pre-onboarding training. 

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SEBI has invited comments from market participants and the public on the consultation paper until September 11.