SEBI proposes wider role for online bond platforms, including tax-saving bonds and IFSC products

The Securities and Exchange Board of India has proposed modifications in the regulatory framework for Online Bond Platform Providers (OBPPs) with the objective of promoting “ease of doing business” and expanding permissible investment options.

SEBI said the consultation paper seeks “comments/ views/ suggestions from the public on the proposals related to ease of doing business for Online Bond Platform Providers (OBPPs).”

What OBPPs can currently offer?

As per SEBI’s existing framework under its master circular, Online Bond Platform Providers (OBPPs) are permitted to offer only specific categories of instruments, including:

• Listed debt securities, municipal debt securities and securitised debt instruments

• Debt securities and related instruments proposed to be listed through public issues

• Listed Government Securities, State Development Loans and Treasury Bills

• Listed Sovereign Gold Bonds

• Other products or services regulated by SEBI, RBI, IRDAI or PFRDA

This means OBPPs are currently limited to listed securities or clearly regulated financial products.

Why SEBI is reviewing the framework

Under the current structure, SEBI noted that there is ambiguity around certain instruments, particularly tax-saving bonds under Section 54EC of the Income Tax Act, 1961.

These bonds are issued by government-notified entities such as Power Finance Corporation, Indian Railways Finance Corporation and REC Limited. They are used to provide capital gains tax exemption to eligible investors, but are exempted from listing requirements under existing regulations, creating uncertainty on whether OBPPs can offer them.

• Bonds under Section 54EC of the Income Tax Act, 1961.

• Bonds under Section 85 of the proposed Income-tax Act, 2025

This move is intended to “enhance ease of doing business and provide clarity on permissible products.”

Investor disclosures and safeguards

SEBI has proposed that OBPPs must disclose key features of such bonds, including:

• Eligible issuers

• Lock-in period

• Investment limits

• Non-transferability

• Tax benefits and application details

It has also mandated a clear disclaimer stating that these are specific tax-saving instruments and that investor grievances will not fall under SEBI’s purview, and must be addressed directly to the issuer.

Proposal to include IFSC-regulated products

It noted that there is currently “no explicit provision” permitting such offerings. The proposal is subject to compliance with the Foreign Exchange Management Act, including Overseas Investment Rules and Liberalised Remittance Scheme limits.

Timeline for feedback

SEBI has invited public comments on the proposals. The last date for submitting feedback is May 26, 2026.