Speaking at the CareEdge Debt Market Summit 2026 in Mumbai on Tuesday (May 26), Tuhin Kanta Pandey said the Securities and Exchange Board of India (SEBI) was examining municipal bond regulations amid a wider push to strengthen India’s corporate debt ecosystem.
The review comes as policymakers look to improve liquidity and investor participation in bond markets, which remain relatively underdeveloped compared with the equity segment.
Pandey said India requires “patient capital” to fund infrastructure creation, refinancing needs and long-gestation projects, adding that a deeper debt market would be essential to sustaining long-term economic growth.
Municipal bonds are debt instruments issued by urban local bodies to raise funds for civic infrastructure projects such as water supply systems, roads, transport networks and sanitation facilities. However, the segment has seen limited participation from both issuers and investors in India.
Alongside the municipal bond review, SEBI is also exploring a pilot project for tokenisation of corporate bonds as part of efforts to modernise debt market infrastructure.
The pilot, expected to roll out over the next six to nine months, will examine whether distributed ledger technology can improve settlement efficiency, transparency, traceability and servicing in the corporate bond market.
Tokenisation involves converting financial assets such as bonds into digital tokens that can be recorded and traded on blockchain-based systems, potentially enabling faster settlements and improved liquidity.
Pandey said the regulator would move cautiously while assessing the technological and operational risks associated with tokenised assets.
He also said SEBI, along with the Reserve Bank of India and the finance ministry, is working on a framework for market-making in corporate bonds following announcements made in the Union Budget 2026.
In addition, the regulator is reviewing whether companies with only listed debt securities should continue to follow disclosure requirements similar to those applicable to equity-listed firms under the Listing Obligations and Disclosure Requirements (LODR) framework.
SEBI is also considering a separate category of brokers dedicated to debt markets to lower compliance costs and encourage specialised participation in the fixed-income segment.
-With Reuters inputs