India's Corporate Bond Market Set for Rapid Expansion in FY 25 & FY 26

  india-s-corporate-bond-market-set-for-rapid-expansion-in-fy-25-fy-26.html
  Business and Finance on Tue, Dec 23rd, 2025 by The Quint
      Locale: INDIA

Corporate Bond Growth in India: What FY 25 & FY 26 Hold for Issuers and Investors

India’s corporate bond market—historically modest compared to the country’s sovereign debt and equity universe—has begun to move off its plateau. The Quint’s Brand Studio, in partnership with Partner India, has mapped out a clear trajectory for the market in the next two fiscal years (FY 25 = 2024‑25 and FY 26 = 2025‑26). The article pulls together macro‑economic trends, regulatory shifts, investor appetite and sector‑specific developments that collectively suggest a robust upward swing.

1. The Current Landscape

The narrative starts by noting that corporate bonds have historically accounted for only about 1 % of India’s total debt market. The 2023‑24 fiscal year saw issuances totaling roughly ₹2.7 trn (≈ $31 bn), a 20 % increase over the previous year, yet still dwarfed by sovereign debt (₹10 trn). The article cites a BSE Corporate Bond Index that tracks the performance of domestic issuers, and points to a steady uptick in both the number of issuers and the average maturity of issues.

Link: BSE Corporate Bond Index – provides a rolling benchmark of corporate bond prices, illustrating the upward price trend that has accompanied the volume growth.

2. Why FY 25 and FY 26 are Pivotal

2.1 Monetary Policy Outlook

A key driver highlighted is the Reserve Bank of India’s (RBI) stance on interest rates. The Monetary Policy Committee (MPC), meeting in October 2023, left the repo rate at 6.50 % – a level that the article argues is “in the sweet spot” for issuers. Lower yields reduce borrowing costs, making bond issuances more attractive. The RBI’s Monetary Policy Report further suggests that the central bank’s “targeted asset purchase programme” (TAPP) will inject liquidity into the system, supporting longer‑dated debt issuance.

Link: RBI Monetary Policy Report – details the projected trajectory of repo rates and TAPP.

2.2 Regulatory Simplification

The Securities and Exchange Board of India (SEBI) announced a set of simplified issuance norms in November 2023. These include:

• Lower minimum subscription thresholds (from ₹1 cr to ₹50 m).
• Electronic declaration of issuances through the “Corporate Bond Portal.”
• Extended credit risk assessment windows to accommodate the needs of smaller issuers.

The article argues that this “low‑barrier” approach will particularly benefit mid‑cap companies that have historically struggled to access bond markets.

Link: SEBI Corporate Bond Issuance Guidelines – outlines the new procedural and disclosure requirements.

2.3 Investor Appetite

The piece notes that Foreign Institutional Investors (FIIs) have started to view Indian corporates as a diversified risk bucket. In FY 24, FIIs acquired approximately ₹1.2 trn of corporate bonds, up from ₹800 bn the prior year. Domestic retail investors, via mutual funds and pension funds, also increased their holdings, buoyed by the government’s “National Pension System” (NPS) reforms which earmark a portion of retirement funds for corporate bonds.

3. Growth Projections

The Quint’s analysis, bolstered by data from Partner India, projects that the corporate bond issuance will hit ₹5.5 trn in FY 25 and ₹7.8 trn in FY 26 – a compound annual growth rate (CAGR) of roughly 30 %. This is based on three pillars:

1. Economic Recovery – GDP growth expected at 6 %–6.5 % in FY 25 and 6.2 % in FY 26.
2. Increased Capital Expenditure – Infrastructure and renewable projects will push companies to seek longer‑dated debt.
3. Credit Rating Upgrades – Ratings agencies are expected to raise the credit ratings of several mid‑cap firms, expanding the “safe” bond cohort.

Link: Partner India Corporate Bond Outlook – provides a deeper dive into the assumptions behind the growth figures.

4. Sectoral Highlights

The article breaks down growth by sector, noting that:

• Infrastructure will lead, with an estimated ₹2 trn issuance in FY 25, largely driven by public‑private partnership (PPP) models.
• Renewable Energy will see a 40 % uptick as green bonds gain traction.
• Manufacturing will remain steady but will increasingly tap into Sustainability‑Linked Bonds (SLBs) to capture ESG‑centric capital.

A notable link to the “Green Bond Market in India” study is included, underscoring the regulatory and investor incentives for environmentally friendly issuances.

5. Risks and Mitigations

No forecast is complete without a risk assessment. The article cautions about:

• Credit risk – a potential rise in defaults if economic slowdown occurs.
• Liquidity risk – smaller bonds may suffer from thin trading volumes.
• Regulatory changes – any tightening of capital adequacy norms could curb issuances.

To counter these, the author recommends that issuers adopt rigorous risk‑management frameworks, while investors diversify across sectors and maturities.

6. Takeaway for Stakeholders

For issuers: FY 25 and FY 26 present a “golden window” to raise capital at relatively low costs, especially if they can leverage the simplified SEBI norms and tap into FII interest.

For investors: The next two fiscal years are poised to offer a broader selection of bonds, ranging from safe sovereign‑backed corporates to high‑yield infrastructure deals. However, investors should remain vigilant about credit quality and liquidity.

For policy makers: Continued support through targeted liquidity injections and further regulatory easing could cement India’s position as a competitive corporate bond market in Asia.

7. Further Reading

• BSE Corporate Bond Index – https://www.bseindia.com/corporate-bond-index
• RBI Monetary Policy Report – https://www.rbi.org.in/monetary-policy
• SEBI Corporate Bond Issuance Guidelines – https://www.sebi.gov.in/corporate-bond-guidelines
• Partner India Corporate Bond Outlook – https://partnerindia.com/corporate-bond-outlook
• Green Bond Market in India – https://www.ecb.org/green-bond-india

These resources provide deeper quantitative insights and support the article’s narrative of a rapidly evolving corporate bond landscape in India.