Explained: How India's bond market became more accessible over the last 10 years
India's bond market today looks vastly different from what it did a decade ago. Once dominated by institutional investors and traditional debt issuances, the market
India's bond market today looks vastly different from what it did a decade ago. Once dominated by institutional investors and traditional debt issuances, the market has steadily evolved into a broader ecosystem supported by regulatory reforms, digital platforms, innovative products and a growing pool of investors.The transformation is visible across participation, market depth and product innovation. While the market has become significantly larger and more accessible, experts believe there is still work to be done to improve liquidity, attract greater foreign participation and create a more vibrant market for lower-rated corporate debt.According to CareEdge Ratings, India's corporate bond market has expanded steadily over the years. Outstanding corporate bond issuances have increased from around Rs 11 trillion in FY12 to nearly Rs 59 trillion in FY26, registering a compound annual growth rate (CAGR) of 13.1%.Despite this growth, banks continue to dominate corporate financing. In FY26, the non-financial commercial sector mobilised nearly Rs 45 trillion, with around 65% of the funding coming through non-food bank credit, highlighting that the bond market is yet to emerge as the primary source of long-term corporate finance.CareEdge Ratings also noted that market depth remains uneven. Corporate bond issuances continue to be concentrated in highly rated securities, with AAA-rated papers accounting for 58% of issuances in FY26 (up to November 2025), while AA-rated bonds contributed another 19%.Lower-rated issuances remain limited as insurance companies and pension funds are largely restricted to investing in AA-rated and above securities. Foreign participation is also modest, with FPIs accounting for only 5.4% of outstanding holdings, while secondary market liquidity remains constrained because a large share of privately placed bonds are held until maturity by long-term institutional investors.Reforms have laid the foundationA series of policy measures over the past few years has helped broaden the market and improve its functioning.Sarbartho Mukherjee, Senior Economist at CareEdge Ratings, said regulatory reforms have largely focused on strengthening investor protection, improving transparency and widening participation in the corporate bond market.He cited the RBI's decision to remove the 30% concentration limit and restrictions on short-term corporate bond investments for foreign portfolio investors in 2025 as an important step towards making India's debt market more attractive to overseas investors.Mukherjee also said reforms around InvITs and REITs have created alternative channels for infrastructure financing, enabling companies to raise long-term capital outside the traditional banking system while broadening investment opportunities.Beyond these initiatives, regulators have introduced several measures to improve market efficiency.
The BriefWire