The Securities and Exchange Board of India has proposed amending Regulation 31 of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 to permit debt issuers to offer incentives in public issues to specified categories of investors. The move is aimed at boosting retail participation in the bond market amid a sharp decline in public debt issuances. Under the revised framework, issuers may offer incentives in the form of additional interest or a discount to the issue price to senior citizens, women, armed forces personnel (serving, retired, and widows/widowers), and retail individual investors. However, such incentives will be strictly limited to the initial allottee and will lapse upon transfer or transmission of the securities. Public consultation showed broad support for the proposal, with operational suggestions addressed through clarifications and safeguards. The revised proposal also introduces a clear definition of “retail individual investor” aligned with existing securities regulations. Overall, the amendment seeks to enhance the attractiveness of public debt issues while preserving market integrity and preventing arbitrage. Also Read: Minutes of SEBI Board Meeting Dated: 17th December 2025
Permitting debt issuers to offer incentives in public issues to certain category of
investors
1. Objective
1.1. This Board Memorandum proposes an amendment to Regulation 31 of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations 2021 (“NCS Regulations”) to permit debt issuers to offer incentives in public issues to certain category of investors in order to encourage them to invest in debt securities, thereby promoting the development of bonds market.
2. Background
2.1. SEBI has been receiving feedback from the industry for increasing participation of retail investors in the debt market. During discussions held with SEBI, a few market participants proposed to permit debt issuers to offer incentives in public issues to certain category of retail/ individual investors in order to encourage them to invest in debt securities.
2.2. Upon analysis of recent data in respect of public issuance of NCDs, it is observed that the amount of public debt issues has been low and reduced from Rs. 19,168 Crore in FY 2023-24 to Rs. 8,149 Crore in FY 2024-25 [Source: SEBI Annual Report 2024-25], which emphasizes the need to attract retail participation in debt market through public issuance mode.
3. Relevant regulatory provision
3.1. Regulation 31 of SEBI (Issue and Listing of Non-Convertible Securities) Regulations 2021 (“NCS Regulations”) provides as under:
“Prohibition on payment of incentives
31. Any person connected with the issue shall not offer any incentive, whether direct or indirect, in any manner, whether in cash or kind or services or otherwise to any person for making an application in the issue, except for fees or commission for services rendered in relation to the issue.”
4. Need for review:
4.1. Comparable fixed income products for retail investors offer incentives like higher interest rates for certain categories of investors. In order to make debt securities attractive for retail investors, it is proposed to permit issuers to offer incentives to categories of allottees like senior citizens, women, armed forces personnel (viz. serving Defence personnel, ex-servicemen and widows of ex-servicemen) and retail subscribers to encourage retail participation in debt securities, while providing a fillip to the number of public issuances in the debt market.
4.2. Similar offerings in Securities market: In case of Offer for Sale (OFS) of shares by promoters through Stock Exchange mechanism, SEBI has permitted the seller to offer discount to retail investors. The details of discount and percentage of reservation for retail investors are required to be disclosed upfront in the notice of OFS to the exchange.
4.3. Similar offerings in Banking sector: It is a common practice for all major banks (SBI, HDFC, ICICI, etc.) to offer higher interest rates on Fixed Deposits (FDs) to senior citizens. Further, certain banks and NBFCs (e.g. Indian Bank, Shriram Finance Ltd.) also offer higher interest rates on FDs to women depositors.
4.4. Similar offerings in non-financial sector: Armed forces personnel are entitled to financial incentives in the form of discounts on domestic travel through various Indian airlines and travel portals, with offers on base fares, waived convenience fees, and extra baggage allowances.
4.5. Based on the aforementioned similar precedent/ practices in the securities market/ banking sector/ non-financial sector, it is felt that offering incentives to certain category of investors, (to begin with, viz. senior citizens, women, armed forces personnel and retail subscribers) for subscription in debt securities will enhance the competitiveness of debt securities for the said class of investors, which in turn may increase their participation in debt securities and, thereby, provide a fillip to the number of public issuances in debt market. Based on the experience gained, the categories may be further broadened in future.
5. Public consultation
5.1. SEBI issued a consultation paper titled “Consultation for permitting debt issuers to offer incentives in public issues to certain category of investors” on October 27, 2025. The last date for receiving public comments was November 17, 2025. A copy of the consultation paper is enclosed as Annexure A. The Consultation paper sought public comments on the following proposal:
5.1.1. Permit issuers to offer incentives in the form of higher coupon rate or discount to the issue price to certain categories of allottees like senior citizens, women, armed forces personnel (viz. serving Defence personnel, ex-servicemen and widows of ex-servicemen), retail subscribers or any other category of investors as may be specified by SEBI from time to time.
5.1.2. The higher coupon rate shall be available only to the initial allottee and shall not be available in case the bonds are transferred/ transmitted.
5.2. A total of 16 entities responded to the consultation paper with their views/ inputs/ suggestions. The respondents include investors, Stock Exchange, listed entities, law firms, stock brokers and Registrar and Transfer Agent (RTA). A summary of the public comments received on the said consultation paper is as under:
| No. of people/entities agreeing to the proposal |
||||||
| Proposal | Strongly Agree | Agree | Partially Agree | Disagree | Strongly Disagree | Total |
| Whether it would be appropriate for issuers to offer higher coupon rate or discount to the issue price to certain categories of investor, but limited to the initial allottee only? If yes, which categories of investors may be permitted for the same? | 4 | 8 | 3 | 0 | 1 | 16 |
5.3. While a majority of the respondents have agreed with the proposal, they have made additional suggestions related to the proposal. One respondent, mentioned in the “Strongly Disagree” category in the table above, has cited operational challenges with regard to implementation of the proposal, rather than disagreeing with the proposal per se. The detailed comments/ rationale received, along with SEBI’s views on the same, are placed at Annexure B.
6. Comments of Corporate Bonds & Securitization Advisory Committee (CoBoSAC):
The proposed amendment, along with the analysis of the public comments and SEBI’s views thereon, was placed for consideration of the members of CoBoSAC during the meeting held on November 26, 2025. While agreeing with the proposals, CoBoSAC suggested that instead of specifying “a higher coupon rate”, the proposal may specify offering of additional incentive/ interest. Further, it was suggested to use the definition of “retail individual investor” for debt securities as provided under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.
7. Revised proposal:
7.1. After taking into account public comments and feedback of CoBoSAC, the proposal has been revised. Accordingly, it is proposed to amend the NCS Regulations, as given below:
| S. No. | Extant Regulation 31 | Proposed Regulation 31* |
| 1. | Prohibition on payment of incentives
31. Any person connected with the issue shall not offer any incentive, whether direct or indirect, in any manner, whether in cash or kind or services or otherwise to any person for making an application in the issue, except for fees or commission for services rendered in relation to the issue. |
Prohibition on payment of incentives
31. Any person connected with the issue shall not offer any incentive, whether direct or indirect, in any manner, whether in cash or kind or services or otherwise to any person for making an application in the issue, except for fees or commission for services rendered in relation to the issue. Provided that nothing contained in this regulation shall preclude the issuer from offering an incentive in the form of additional interest or a discount to the issue price to certain categories of allottees, namely, senior citizens, women, armed forces personnel namely, serving and retired defense It is clarified that such incentive shall be available only to the initial allottee and shall not be available in case the debt securities are transferred/ transmitted post allotment. |
| Extant Regulation | Proposed Regulation 2 (1) (gga) | |
| 2. | Nil | “Retail individual investor” means an individual investor who applies or bids for debt securities for a value of not more than two lakhs rupees. |
*Note: Additions (proviso to Regulation 31) are in bold in the table.
7.2. Further, the following definition of “retail individual investor” may be inserted under Regulation 2 of the NCS Regulations:
“‘Retail individual investor’ means an individual investor who applies or bids for debt securities for a value of not more than two lakhs rupees.”
8. Proposal to the Board:
8.1. The Board is requested to:
8.1.1. consider and approve the proposal as detailed in para 7 above and the consequent draft amendment notification enclosed as Annexure C;
8.1.2. authorize the Chairman to make consequential and incidental changes and take necessary steps to give effect to the decisions of the Board.
Enclosed.: 1. Annexure A to Board Memorandum
2. Annexure B to Board Memorandum
3. Annexure C to Board Memorandum
Annexure A
Available on SEBI website
https://www.sebi.gov.in/reports-and-statistics/reports/oct-2025/consultation-paper-for-permitting-debt-issuers-to-offer-incentives-in-public-issues-to-certain-category-of-investors- 97452.html
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