The Securities and Exchange Board of India (SEBI) is examining a proposal to introduce a specialised category of distributors aimed at expanding the reach of debt products and increasing retail participation in bond investments.
Speaking at the Federation of Indian Chambers of Commerce & Industry Products Distribution Summit, Amarjeet Singh, Whole-Time Member at SEBI, said, “One area which we picked up recently is, we are examining a proposal to introduce a specialised category of distributors to increase the reach of debt products.”
Bond retailisation
The regulator is looking at replicating the success of mutual fund distribution across other segments of the financial system and is exploring how we can use this specialised category of distributors to expand the investor base and promote the retailisation of bonds.
The proposed framework would operate on lines similar to mutual fund distributors and help simplify bond investments for retail investors.
“Much like mutual fund distributors, it is envisaged they will simplify the investment process for retail investors by assisting with KYC formalities, documentation and initiating transactions,” Singh said.
The proposal comes at a time when household savings are increasingly moving towards capital markets amid rapid financialisation. Singh said assets under management across mutual funds, portfolio management services and alternative investment funds have grown at a compounded annual growth rate of more than 19 per cent, reaching ₹91 lakh crore as of March 2026.
Singh said that nearly 54 per cent of the mutual fund industry’s assets under management were mobilised through regular plans as of March-end 2026. “For many retail investors, particularly first-time investors, distributors remain the first point of engagement with financial markets,” he said.
“Excessive focus on short-term performance, rapid customer acquisition or distribution volumes can actually create risks of misselling, unsuitable recommendations or product pushing.”
He added that mis-selling often remains undetected as investors may realise much later that unsuitable products had been sold to them. “The interesting part here is that misselling can happen without you receiving any complaint about it. It’s somewhat passive,” Singh said.
The whole-time member also urged the industry to maintain transparency and suitability standards across digital platforms. While digital channels improve awareness and outreach, they can equally amplify misinformation, speculative behaviour, and short-termism, he said.
“Market participation should be driven by informed decision-making and long-term planning, not driven by momentum or social media trends. The growing use of Al in financial intermediation raises important questions around accountability, transparency and suitability,” he said.
Stressing the need for ethical distribution practices, Singh said distributors play a critical role in the financial ecosystem. “Distributors are not merely facilitators of transactions. They are stewards of the investor journey. Growth not built on investor trust will ultimately become difficult to sustain,” he said.
“Conflicts of interest are inherent to financial intermediation… the endeavour should therefore be to ensure that such conflicts are recognised, disclosed, and managed transparently.