The Securities and Exchange Board of India (Sebi), the country's securities markets regulator, is set to launch a network of fixed income channel partners designed to broaden access to the retail bond market, with a particular focus on increasing participation in smaller cities across India.

Under the proposal, eligible individuals and firms will be able to qualify as channel partners by fulfilling specified certification standards. Existing mutual fund distributors can apply without incurring any enlistment fees. The model follows the distribution architecture familiar from the mutual fund industry, in which certified intermediaries extend the reach of financial products beyond brokerages and bank branches concentrated in the major metros, and an equivalent network for debt products would aim to do the same for bonds.

Sebi is the statutory authority that regulates India's securities markets, with a mandate that includes protecting investor interests and promoting the development of the market. Direct retail participation in India's corporate bond market has historically been limited, with the market dominated by institutional investors such as insurers, mutual funds and pension funds, while household savings have flowed largely through bank deposits, small savings schemes and debt mutual funds rather than direct bond holdings. A wider distribution network is aimed at addressing that access gap, and frameworks of this kind typically take final shape after Sebi's board approves the proposal and the resulting regulations are notified.

Banks Ride RBI Swap Wave to Raise $12 Billion via Overseas Debt

In a related debt-market development, Indian banks have raised $12 billion via overseas debt, riding an RBI swap wave, according to a companion report.

This week was the busiest for forex debt issuance by Indian lenders. ICICI Bank, Kotak Mahindra Bank, IDFC First Bank, HDFC Bank and Bank of Baroda together raised $4.4 billion, and the bulk of the proceeds may be used to help fund the leverage for foreign currency non-resident (bank), or FCNR(B), deposits. FCNR(B) accounts allow banks in India to accept deposits from non-resident Indians denominated in foreign currency, and such deposits have historically served as a channel for attracting foreign currency inflows during periods of pressure on the rupee. The RBI, or Reserve Bank of India, is the country's central bank and banking regulator; a swap window allows banks to exchange foreign currency funds for rupees, helping them manage the currency risk associated with overseas borrowings raised to support such deposit mobilisation.

Source: Economic Times Markets