Retail investors drive surge in India's bond market participation

Retail investors are rapidly reshaping India’s bond market, which has long been dominated by institutions. With regulatory changes and new digital platforms improving access, bonds are becoming part of mainstream investment portfolios in 2025.

A major catalyst is the Securities and Exchange Board of India (SEBI) decision to lower the minimum investment in corporate bonds from around ₹1 lakh to ₹10,000. This adjustment has “led to retail coming back into the space” by making participation more affordable.

Issuers are also being permitted to offer slightly higher coupon rates or small price discounts to specific retail categories, including senior citizens, women, army personnel and small investors. This is expanding the investor base and improving inclusion.

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Digital access has provided another boost. Online bond marketplaces are enabling seamless participation even from tier-2 and tier-3 cities, making fixed-income markets more accessible than ever before. Further support has come from the Reserve Bank of India’s (RBI) Retail Direct Scheme, which allows individuals to open gilt accounts free of cost and trade government securities digitally.

Equity volatility in 2025 has accelerated the shift toward capital preservation and steady income instruments. Investors are locking in current yields before potential rate cuts narrow the spread between bonds and fixed deposits. The stable cash flows that bonds offer are helping retail investors diversify their portfolios, hedge against equity swings and secure predictable returns.

Government floating-rate savings bonds and high-grade corporate bonds are currently offering yields between 8% and 10%, which is higher than fixed deposit returns and stronger than recent equity market performance. Investors are focusing primarily on AA and A-rated issuances and long-term government securities, the latter seen as having capital gain potential if interest rates decline.

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The rise in retail activity is deepening liquidity, improving price discovery and encouraging innovation in product design. The total number of retail bond trades in 2025 has already reached 1.2 million, and this is expected to climb to about 2.2 million in the fiscal year 2025-26 (FY26).

Long-term projections indicate even greater momentum. According to estimates referenced from CRISIL, India’s corporate bond market could more than double to ₹100-120 lakh crore by 2029-30 (FY30).

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