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The Securities and Exchange Board of India (Sebi) plans to let online bond platform providers (OBPPs) offer products from Gujarat International Finance Tec-City (GIFT City), but early signals suggest platforms may move cautiously.
In a consultation paper issued on Tuesday, the markets regulator recommended changes aimed at easing business conditions for OBPPs while widening the range of products they can offer. Mint explains what these changes are and whether OBPPs are likely to tap the opportunity.
Sebi has proposed allowing OBPPs to offer products regulated by the International Financial Services Centre Authority (IFSCA), such as overseas debt investments, that aren’t easily accessible to most Indian investors using digital platforms. The move is expected to widen the current scope of OBPPs, which are largely restricted to listed debt securities, government securities and similar domestic instruments.
The proposal also seeks to align OBPP operations with those of stockbrokers, subject to compliance with foreign exchange rules, including overseas investment limits under the Liberalised Remittance Scheme (LRS). OBPPs will need to detail how investors can resolve complaints with products regulated by authorities other than Sebi. In FY25, resident Indians remitted a total of $2.34 billion overseas under the LRS, according to data from the Reserve Bank of India (RBI).
The proposal stems from a request by the IFSCA, which asked Sebi to permit OBPPs to offer debt securities listed overseas through a regulated framework within the International Financial Services Centre.
Currently, Sebi-registered stockbrokers can operate in GIFT City by registering as broker-dealers with the IFSCA. However, OBPPs, which are registered as stockbrokers in the debt segment, are not permitted to offer IFSCA-regulated products, creating asymmetry in market access.
The changes are also rooted in a broader regulatory effort to deepen the role of GIFT City and connect it more directly with domestic investors. OBPPs, with their digital-first model, are seen as a natural pivot for such an integration.
Vineet Agrawal, co-founder of Jiraaf, a Sebi-registered OBPP, said, "The proposal is a natural extension of the OBPP ecosystem. Few OBPPs have had discussions with Sebi and IFSCA to allow them to operate in GIFT City and provide international bonds to their investor base. Investors who have funds lying in LRS can now allocate them to overseas bonds through platforms.”
Access to GIFT City products means platforms can move beyond domestic bonds to offer more sophisticated instruments, including dollar-denominated securities.
However, OBPPs aren’t exactly jumping at the opportunity. Industry participants said investor enquiries, compliance, and other regulatory frameworks will play a major role in determining this pivot.
“OBPPs are keen to explore the GIFT City route but the devil is in the details. Compliance, customer enquiries and the implementation of norms matter. In our view, OBPPs will take time to fully understand the same before taking this product live,” said Nikhil Aggarwal, founder & group CEO, Grip Invest, a Sebi-regulated bond provider platform.
Also, the pivot to GIFT City is unlikely to drive significant volumes, as retail demand for overseas bonds is low. Only high-net-worth individuals are expected to seek out these products, primarily for portfolio diversification. Agrawal of Jiraaf said, “A few OBPPs are keen to explore the opportunity, but a sharp pickup is unlikely in the near term given that product will be new and core retail demand for overseas bonds remains limited.”
Foreign debt is still a niche product in India, with most retail investors focused on domestic fixed-income and equity products. Even among affluent investors, allocations to such instruments are modest and driven by diversification rather than core portfolio exposure.
In fact, Sebi has even struggled to increase retail investments in domestic debt instruments despite undertaking several initiatives to spread awareness. These efforts are yet to see meaningful results as taxation remains a key hurdle. Debt returns are taxed at marginal slab rates with no indexation benefit, while equities enjoy the more favorable capital-gains treatment.
Aggarwal of Grip Invest said, “We haven't yet received a meaningful number of enquiries from retail investors for offshore products. Participation in foreign debt will be a subset of the interest in Indian investment opportunities, which is growing fast but still nascent.”
Sebi has also proposed a set of regulatory tweaks aimed at improving clarity and easing operations of OBPPs. These include permitting platforms to offer tax-saving bonds issued under Section 54EC of the Income Tax Act.
Since these bonds are not required to be listed, there has been persistent confusion regarding whether OBPPs are permitted to distribute them. 54EC Bonds are issued by government-backed entities.
Agrawal said, "The listing of 54EC bonds on OBPPs is a great step as it will allow investors to deploy their capital gains in a more tax efficient manner. We are expecting high retail demand for this product.”
Sebi has also proposed aligning compliance-officer requirements for OBPPs with those of stockbrokers, removing the current restriction that such roles must be held only by company secretaries.
Apoorva is a Mumbai-based journalist at Mint who covers the Securities and Exchange Board of India (SEBI), tracking the pulse of India’s capital markets, regulatory developments and the people who operate within them. She holds a postgraduate diploma in business and financial journalism from the Asian College of Journalism, where she developed a strong foundation in markets, companies, and economic policy. She began her journalism journey with an internship at Bloomberg, where she worked across beats such as real estate, infrastructure, capital markets, and deals, which helped her understanding of business and finance.<br><br>She is guided by the belief that everything in this world can be explained in simple and fewer words, and that idea shapes how she approaches her writing. She aims to cut through complexity and present nuanced regulatory and financial developments in a way that is both accessible and meaningful to readers.<br><br>When she is not tracking market chatter, Apoorva can usually be found deep into a fiction novel or out on a long run. She is also a trained classical dancer in Bharatanatyam, Mohiniyattam, and Kathakali.
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