Regulatory reform by SEBI
SEBI Expands Retail Access to Zero Coupon Bonds: The Securities and Exchange Board of India (SEBI) announced a key regulatory reform on 18 December 2025 to deepen India’s debt markets. It permitted zero coupon bonds to be issued in smaller denominations of ₹10,000. This decision significantly enhances accessibility for retail investors.
Earlier, high face values restricted participation in privately placed debt securities. By lowering the denomination threshold, SEBI aims to broaden the investor base. The reform aligns with SEBI’s long-term objective of strengthening the corporate bond market.
Static GK fact: SEBI was established in 1992 under the SEBI Act to regulate and develop India’s securities market.
Understanding zero coupon bonds
Zero coupon bonds are debt instruments that do not provide periodic interest payments. They are issued at a discount to face value and redeemed at par on maturity. The investor’s return comes entirely from price appreciation.
These bonds are commonly used for long-term financial goals. They offer predictable returns when held till maturity. Their structure makes them sensitive to interest rate movements.
Static GK Tip: Zero coupon bonds are also known as deep discount bonds due to their discounted issue price.
Earlier regulatory limitations
Privately placed non-convertible debentures (NCDs) and non-convertible redeemable preference shares (NCRPS) traditionally carried high face values. This effectively excluded retail investors from participation.
SEBI had earlier allowed a reduced face value of ₹10,000 only for interest- or dividend-bearing securities with fixed maturity. Zero coupon bonds were excluded due to the absence of periodic payouts.
This created an uneven regulatory framework within fixed-income instruments. Zero coupon bonds remained accessible mainly to institutional investors and HNIs.
What SEBI has changed
SEBI has now modified eligibility conditions for reducing the face value of privately placed debt securities. Zero coupon bonds are included under this revised framework. They can now be issued in denominations as low as ₹10,000.
The regulator formally recognised that returns from zero coupon bonds arise through appreciation. Hence, they merit equal regulatory treatment. This change removes a long-standing structural barrier.
Impact on retail investors
Lower denominations make zero coupon bonds more affordable and accessible for retail investors. Individuals can now include these instruments in their portfolios without high capital outlay.
This encourages portfolio diversification beyond traditional bank deposits and interest-bearing bonds. Retail participation in debt markets is expected to rise steadily.
Static GK fact: India’s corporate bond market is significantly smaller than the government securities market in terms of trading volume.
Broader market significance
The reform supports market deepening and liquidity in corporate debt. Increased participation improves price discovery and secondary market activity. Issuers gain flexibility in designing debt products.
The move also aligns with India’s goal of developing a robust fixed-income ecosystem. It reduces overdependence on bank-based financing. Over time, it can lower the cost of capital for corporations.
Static Usthadian Current Affairs Table
SEBI Expands Retail Access to Zero Coupon Bonds:
| Topic | Detail |
| Regulator | Securities and Exchange Board of India |
| Announcement date | 18 December 2025 |
| Instrument affected | Zero coupon bonds |
| New minimum denomination | ₹10,000 |
| Earlier restriction | Allowed only for interest-bearing securities |
| Mode of issue | Private placement |
| Key benefit | Enhanced retail participation |
| Market impact | Improved liquidity and diversification |
