Corporate bonds in India: From institutional stronghold to broader participation
record-breaking corporate bond issuances
, deeper institutional involvement, and a growing appetite for predictable, inflation-beating returns.
In FY25, companies raised a record ₹9.9 lakh crore through corporate bonds, according to recent data released by the Reserve Bank of India (RBI). That's a 28% increase over the previous year. The rise in corporate bond issuance signals growing traction in India's corporate bond market. This also points to an uptick in private corporate capex. The increased corporate debt outlay is likely to power growth, spearheading India to the third-largest economy position by 2028.
Even as issuance soars, one question remains: Are retail investors benefiting from this growth, or is their participation in the corporate bond market still lagging?
Bonds Corner
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Corporate bonds in India: From institutional stronghold to broader participation
India's corporate bond market sees record growth in FY25. Issuance rises by 28%, signaling increased corporate capex. The overall bond market touches ₹226 lakh crore. Retail participation remains low, but accessibility improves with smaller investment sizes. Interest rates ease, making bonds attractive. Platforms like Jiraaf simplify bond investments. Corporate bonds offer a balanced risk-return profile.
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A ₹53.6 lakh crore corporate bond opportunity untapped by retail
India's overall bond market
has now touched ₹226 lakh crore in size (around USD 2.6 trillion), as per RBI's June 2025 Financial Stability Report. Of this, corporate bonds in India account for over ₹53.6 lakh crore in outstanding stock. The rest includes government bonds, treasury bills, and state development loans in India.
Yet, despite this expansion, the
Indian bond market
remains dominated byinstitutional investors. Mutual funds, insurers, banks, and pension funds still hold 96% of outstanding corporate bonds, according to market estimates.
Retail participation rate, by contrast, remains in the low single digits—a glaring gap compared to their enthusiasm for equities and gold.
Why retail investors hesitated — and why that may be changing
Retail investor caution wasn't entirely unfounded. Until recently, many top-rated bonds had minimum investment sizes of ₹1 lakh or more. This ruled out many retail investors. The Securities and Exchange Board of India (SEBI) reduced the minimum ticket size to ₹10,000; these changes have
improved the accessibility of the bond market
.
Liquidity is the second pain point, as the secondary corporate bond market remains uneven, with only 3.8% of the total outstanding stock traded monthly. This lack of depth made it harder for individuals to exit their positions before maturity. This concern is especially relevant for those accustomed to the liquidity of stocks or mutual funds.
But the winds are shifting. The minimum investment size has come down sharply. The bond market's liquidity is gradually improving, thanks to stronger regulations, better transparency, and greater accessibility and visibility. Online bond platforms such as
Jiraaf
are also making it easier for retail investors to participate.
The macroeconomic environment is shifting. Interest rates are now easing, with the RBI cutting the repo rate by 100 basis points in 2025. Inflation is gradually cooling. This is prompting more investors to turn to fixed income securities to lock in higher yields.
Currently, AAA-rated corporate bonds yield 30-50 basis points more than comparable fixed deposits, while AA-rated corporate bonds offer 50-200 basis points higher returns with a similar level of risk to fixed deposits.
The return profile shifts dramatically in favour of investors when A and BBB-rated bonds come into play. These bonds offer 200 to 500 basis points more than fixed deposits with a very balanced risk profile.
While some argue that A- and BBB-rated bonds pose a higher risk and thus offer a higher return, the data paints a different picture. The default ratio of
investment-grade bonds
, which encompasses the AAA to BBB segment, remains low. According to CRISIL, a credit rating agency, BBB-rated bonds witha three-year tenure havethe highest default rate among investment-grade bonds, at just 2.21%. The lower default rates speak to the safety of corporate bonds as an investment alternative to riskier and more volatile asset classes, such as equities, gold, and real estate.
The attached CRISIL data gives a detailed breakdown of the default rates for various credit ratings.
ET Spotlight
India's fixed-income market is also undergoing a technological revolution. Platforms such as the
SEBI-regulated OBPP player Jiraaf
are making corporate bond investments more accessible than ever. With entry points as low as ₹1,000, even everyday investors can now build fixed-income portfolios that were once the domain of institutions.
What is driving the corporate bond market depth
Indian corporate balance sheets are at their healthiest, which is giving Indian Inc considerable headroom to borrow. Corporate bonds offer companies more control than bank loans. Strong financials are also allowing firms to raise capital without diluting its stake in the company.
Additionally, interest rates are reducing. This has prompted corporates to turn to the bond market to fund expansion while retaining tenure, rates, and repayment cycles.
This ease of access is deepening the bond market from the issuer's point of view in FY26. On the other hand, strong demand from foreign portfolio investors (FPIs), as well as institutional and retail demand is driving the supply-side uptick.
The FPIs are attracted to the higher returns provided by corporate bonds as G-sec yields decline. Institutional demand is robust, as debt becomes a more attractive asset in the light of equity market volatility. This is also evident in the increasing cash inflow into debt mutual funds over the past months.
Equity investments had been the darling of investors for the past decade, with most experts and amateur investors vouching for the growth aspect of the asset class. However, despite market uproar around high returns, the average Nifty50 return over the past decade is 12%.
A 12% equity growth barely beats the returns offered by corporate bonds, while posing a much higher risk and volatility. Investors are realising the stability that corporate bonds provide. They are gradually shifting their preference to bonds, focusing on building a well-diversified bond portfolio that includes bonds from different issuers, ratings, and tenures.
Investment platforms, such as Jiraaf, are helping investors access the Indian corporate bond market by offering curated bonds with transparent credit scoring, making corporate bonds more accessible to non-institutional investors. In addition to providing curated deals, Jiraaf is also developing tools that
simplify bond analysis
and make it accessible to all. The first of its kind
Bond Analyzer
brings analysis to the fixed-income realm, which was previously limited to equities.
Looking ahead
Despite its growing size and importance, the Indian bond market still lags behind its global peers in terms of retail penetration.
The direction is promising. As awareness grows, tools become easier to use, and yields remain attractive, there's reason to believe that 2025 could mark an inflection point for
retail entry into corporate debt
.
For investors seeking to balance risk and return amid equity market volatility, corporate bond investment offers a compelling middle path, blending capital preservation with growth.
The views and opinions expressed in the story are independent professional judgment of the experts and we do not take any responsibility for the accuracy of their views. The brand is solely liable for the correctness, reliability of the content and/or compliance of applicable laws. The above is non-editorial content and TIL does not guarantee, vouch or endorse any of it. Please take all steps necessary to ascertain that any information and content provided is correct, updated, and verified.
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