Sebi Proposes Granting Access to GIFT City for Online Bond Platforms

Sebi Proposes Expansion of Online Bond Platform Providers in GIFT IFSC

MUMBAI: The Securities and Exchange Board of India (Sebi) has issued a consultation paper proposing the expansion of online bond platform providers (OBPPs) in the GIFT International Financial Services Centre (IFSC), allowing them to access global debt markets.

The proposal follows a request from the International Financial Services Centres Authority (IFSCA) to permit OBPPs to offer overseas-listed debt securities under a framework regulated by the GIFT City authority. Currently, Sebi allows stockbrokers to undertake securities market activities in GIFT City through a separate business unit or a subsidiary, but OBPPs, although registered as stockbrokers in the debt segment, are not explicitly permitted to offer IFSCA-regulated products.

The proposal aims to align OBPP operations with those of stockbrokers, subject to compliance with foreign exchange rules, including overseas investment limits under the Liberalised Remittance Scheme. Additionally, OBPPs will be required to disclose investor grievance redress mechanisms for products regulated by authorities other than Sebi.

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Sebi also proposes to allow OBPPs to offer tax-saving bonds issued under Section 54EC of the Income Tax Act, which are currently exempt from mandatory listing requirements, creating ambiguity over their availability on online bond platforms. OBPPs must disclose key features of 54EC bonds, including eligible issuers, lock-in period, investment limits, and tax benefits, and carry a disclaimer stating that these are specific tax-saving instruments and that grievance redressal for such investments does not fall under Sebi's purview.

Furthermore, Sebi has suggested easing norms for appointing compliance officers, aligning the requirement with stockbroker rules, allowing OBPPs to appoint compliance officers based on broader eligibility criteria rather than restricting the role to company secretaries. The Institute of Chartered Accountants of India had represented for this change.

Sebi has invited feedback on the consultation paper until 26 May.