How can retail participation in bonds be increased? Read about Sebi’s plan

Over the last decade, equity market investing has grown significantly, particularly through mutual funds by retail investors. However, investing in fixed income products, while growing, still remains largely dominated by institutional investors. 

The Securities and Exchange Board of India (Sebi) is now exploring a possibility to have a specialised category of distributors that will focus predominantly on the bond market. 

"We are examining a proposal to introduce a specialised category of distributors to increase the reach of debt securities. How we can use this specialised category of distributors to expand the investor base and promote the retailisation of bonds," Amarjeet Singh, Whole-Time Member of Sebi said on Wednesday. 

 It is envisaged that similar to mutual fund distributors, these specialised distributors will simplify bond investment process for retail investors by assisting with KYC formalities, documentation and initiating transactions, pointed Singh. He was speaking at a financial products distribution summit organised by FICCI. 

Over the last few years, inflows into mutual funds have seen rapid growth. Assets under management (AUM) across mutual funds, portfolio management services (PMS) and alternative investment funds (AIF) have clocked a 19 per cent compounded annual growth to touch Rs 91 lakh crore. 

Notably as of March 31, 2026, nearly 54 per cent of mutual fund industry AUM comes through regular plans (investments that come through distributors), pointed Singh. It in a way underscores how sizeable distributors still remain, even as investing through direct plans has gained ground over the past many years.

Distributors registered with Association of Mutual Funds of India (AMFI) have grown from 2.4 lakh to 3.4 lakh over five years, according to Singh.

Business correspondents of banks have increased from around 540,000 to over 1.6 million. Insurance agents have grown from 3.4 million to over 5.4 million in the same period, reflecting the scale of financial distribution in India.

Singh said there was a significant headroom for the growth of mutual fund distributors. Pointing Sebi's earlier study, he said that while 53% of households are aware of mutual funds, only around 6.7% were actually investing.

"Industry's future growth will therefore depend on reaching investors across geographies, income segments and demographic groups recognising these structural ground realities," said Singh. 

At the same time, he also stressed upon the need for ethical distribution and cautioned against mis-selling of products.

"Financial products are fundamentally different from most other products. Investors commit their long-term savings based on confidence in the institutions and trust in those who guide them. This places distributors in uniquely important positions," stated Singh.

Growth not built on investor trust will ultimately be difficult to sustain, he cautioned.