Retail bond investors need more risk awareness as access expands

Reports coming in for today mention that India’s retail bond market needs greater investor education and stronger mechanisms to manage credit risk as online bond platforms expand access to set-income products, traders at large stated at the Global Fintech Fest 2026.

The panel, moderated by SEBI’s Maninder Cheema, featured IndiaBonds’ Aditi Mittal, Wint Wealth’s Ajinkya Kulkarni, Stable Broking’s Harish Reddy and Grip Invest’s Nikhil Aggarwal.

Mittal stated technology and regulatory changes have made bonds increasingly accessible to non-institutional market participants, but access alone does not mean market participants understand the risks involved.

“Accessibility is solved through technology,” Mittal stated, adding that the next step was to ensure that market participants were educated around the risks associated with different ratings and yields.

She pointed to SEBI’s proposed Riskometer for bonds, which would use colour coding to help market participants understand the relationship between a bond’s credit rating, yield and risk. The tool could make it easier for retail market participants to distinguish between elevated yields and the additional credit risk that comes with them.

Aggarwal stated market participants can face risks even in listed bonds. He cited the case of an NBFC that saw its rating decline from BBB to BB+ following rising delinquencies, a failed equity fundraise and liquidity stress. The firm eventually defaulted on around Rs 150 crore across six bonds.

That stated, market participants recovered the principal, interest and penalty interest within four months as the underlying loans continued to perform and the bonds were secured by collateral, he stated.

Reddy stated retail market participants often think around risk in binary terms, whether they can lose money or not, rather than assessing probabilities. He proposed creating an insurance-like investor protection mechanism for bonds, potentially with a small universal premium paid by issuers.

Such a mechanism could improve investor confidence, encourage diversification and potentially softer borrowing costs for issuers, he stated.

Kulkarni stated liquidity remained critical for the expansion of retail bonds. Platforms were increasingly developing mechanisms to allow market participants to exit before maturity, while market makers could help bridge the gap between buyers and sellers.

The panel additionally called for greater access to repo-like mechanisms that would allow retail market participants to pledge bonds and borrow against them, potentially making set-income investments more liquid and useful for households.