Sebi broadens scope of online bond platforms, permits IFSCA-regulated products and tax-saving bonds

The Securities and Exchange Board of India (Sebi) has recently expanded the range of products and services allowed for online bond platforms (OBPPs). This includes the ability to offer products and securities regulated by the International Financial Services Centres Authority (IFSCA) and certain tax-specific bonds. According to Sebi's latest circular, OBPPs can now provide bonds issued under two sections of India's Income Tax Act, 1961 and 2025.

Under the revised framework, OBPPs will continue to offer listed debt securities, municipal debt securities, securitised debt instruments, government securities, State Development Loans, Treasury Bills, and Sovereign Gold Bonds. However, they can now also offer products, securities, or services regulated by other financial sector regulators like SEBI, RBI, IRDAI, and PFRDA.

For IFSCA-regulated products, OBPPs must follow the guidelines set for SEBI-registered stock brokers operating within GIFT-IFSC and adhere to FEMA, 1999 requirements. These products must be clearly labeled as international or overseas instruments to avoid confusion with domestic debt securities. The grievance redressal mechanism for these products will be governed by the respective financial sector regulator, with the OBPP specifying this information on its platform.

Additionally, OBPPs are now permitted to offer tax-saving bonds issued under Section 54EC or 85 of the Income Tax Act. These platforms must provide a disclaimer stating that these are tax-specific instruments and that grievance redressal is not with SEBI but the issuer. They must also disclose key features of these bonds, including eligible issuers, lock-in period, investment limits, non-transferability, tax benefits, and application size.

The exemption of these bonds from listing requirements under SEBI regulations must also be prominently disclosed.