India is racing toward an ambitious economic future. Policymakers speak openly about building a USD 30 trillion economy by 2047, expanding infrastructure at unprecedented scale, and unlocking long-term capital for growth. Yet beneath this optimism lies a structural imbalance that has persisted for decades: India’s corporate bond market is far too small, too concentrated, and too inaccessible to support the country’s ambitions.
In December 2025, NITI Aayog acknowledged this reality head-on. Its report on deepening India’s corporate bond market lays out a stark assessment—and a bold solution. To finance India’s growth sustainably, the corporate bond market must grow nearly seven times over the coming decades. The roadmap is phased, deliberate, and urgent. And at the heart of it all lies 2026 the year when structural reform shifts from intention to execution.
This is not just a policy document. It is a warning, a blueprint, and an opportunity rolled into one.
Why India Needs a Bigger Bond Market—Now
India’s financial system remains overwhelmingly bank-centric. While banks play a critical role, they are ill-suited to finance long-term capital needs alone. Infrastructure projects, renewable energy assets, logistics networks, and urban development require patient capital—funding that extends beyond typical bank loan tenors.
Today, corporate bond issuance and bank credit appear similar in headline numbers. But dig deeper and the imbalance becomes clear. The vast majority of corporate bond issuance happens through private placements, negotiated between companies and large institutional investors. Public bond issuances—those accessible to retail investors—remain a tiny fraction of the market.
This concentration creates three problems:
1. Retail investors are excluded from a major asset class that could offer stable income and diversification.
2. Secondary market liquidity remains weak, limiting price discovery and flexibility.
3. Funding risk concentrates within banks, increasing systemic vulnerability during economic slowdowns.
A deeper bond market spreads risk, diversifies funding sources, and channels household savings into productive investment. That is why NITI Aayog views bond market expansion not as optional, but essential.
The 7X Imperative Explained
NITI Aayog estimates that India’s corporate bond market must grow from roughly ₹50–55 trillion today to over ₹100 trillion by 2030, and significantly beyond thereafter. Infrastructure alone requires capital investment exceeding USD 1 trillion over the next decade.
Banks cannot and should not carry this burden alone.
A robust bond market enables:
But reaching this scale requires more than demand. It requires structural reform.
Phase I (2026–2027): Fixing the Foundations
The first phase of the roadmap focuses on removing friction—regulatory, technological, and operational.
Regulatory Coordination
Issuers today navigate overlapping authorities, duplicative disclosures, and inconsistent timelines. This complexity makes public bond issuance expensive and slow compared to private placements. Phase I aims to streamline this maze through coordinated oversight and simplified processes.
Digital Infrastructure
NITI Aayog places heavy emphasis on digital rails. The vision includes end-to-end electronic issuance, compliance, and settlement—reducing delays, errors, and costs. When issuance becomes faster and cheaper, public bond markets become viable for a broader range of companies.
Retail Access
Phase I also prioritizes retail participation. Simplified disclosures, electronic trading mechanisms, and smaller ticket sizes are meant to bring household investors into the bond ecosystem—something India has historically struggled to achieve.
These changes may sound incremental, but together they shift incentives. When public issuance becomes competitive with private placements, issuer behavior changes.
Phase II (2027–2029): Expanding the Market’s Reach
Once the foundation is stable, the roadmap turns toward expansion.
SME Bond Platforms
Mid-sized companies face disproportionately high costs when accessing bond markets. Dedicated SME bond platforms—similar to equity SME exchanges—could allow smaller firms to raise debt efficiently without institutional-scale overheads.
This matters because India’s MSME sector remains underfinanced despite its economic importance.
Instrument Innovation
The roadmap also calls for expanding the range of debt instruments: green bonds, covered bonds, infrastructure-linked securities, and laddered bond products. These instruments attract different investor profiles and align capital with specific development goals.
As ESG investing grows globally, well-structured Indian bond products could attract both domestic and international capital.
Phase III (2030–2031): A Mature, Digital Bond Ecosystem
The final phase envisions a market that resembles developed economies—but adapted to India’s strengths.
Risk Management Tools
A functioning Credit Default Swap (CDS) market would allow investors to hedge credit risk and improve price discovery. CDS spreads often reveal market stress long before ratings change, enhancing transparency.
Blockchain and Settlement Reform
Distributed ledger technology could enable near-instant settlement, reduce counterparty risk, and integrate issuance, trading, and compliance into a unified system.
Unified Oversight
A dedicated corporate bond market regulator could replace fragmented supervision with coherent policy—lowering uncertainty for issuers and investors alike.
The RBI’s Monetary Policy Window
The urgency behind bond market reform is closely tied to where India sits in the interest-rate cycle. Since early 2025, the Reserve Bank of India has clearly shifted toward an accommodative stance, cutting policy rates by about 100 basis points. By December 2024, the repo rate had moved down to 5.25%, creating immediate implications for borrowers and investors alike.
Lower policy rates directly compress corporate borrowing costs. Following these cuts, top-rated one-year corporate bonds are yielding close to 6.8%, while slightly lower-rated AA+ bonds offer around 7.2–7.3%. When set against bank fixed deposits hovering near 5–5.5%, the relative appeal of bonds becomes obvious. Unsurprisingly, corporate bond issuance surged, with fundraising in FY2025 nearing ₹10 trillion—an all-time high.
What’s notable, however, is that banks have passed on barely half of these rate cuts to borrowers. Deeper, more competitive bond markets could close this gap. As companies increasingly tap bonds instead of bank loans, lenders may be forced to transmit monetary policy more efficiently.
The Structural Challenge: Why 95% Remains Institutional
To understand why India’s corporate bond market is still overwhelmingly institutional, it’s important to look at how bonds are actually issued. The dominance of private placements isn’t accidental—it’s the logical outcome of cost, time, and complexity. Public bond issuances require extensive disclosures, multiple regulatory clearances, engagement with rating agencies, and detailed legal documentation. For a company raising ₹100 crore, issuance costs can range between 0.25% and 0.5%, translating into ₹25–50 lakh even before factoring in delays. Approval timelines often stretch into months, creating uncertainty that many issuers prefer to avoid.
Private placements, by contrast, are swift and efficient. Issuers negotiate directly with a small group of institutional investors, share limited documentation, and close deals within weeks. This efficiency has created a two-tier market: a streamlined institutional channel and a cumbersome public route that discourages retail participation. Ironically, institutions with the scale and expertise to absorb complexity enjoy easier access, while retail investors face higher barriers.
NITI Aayog’s roadmap aims to rebalance this skew. Proposals around simplified disclosures, lower minimum issue sizes, and lighter compliance are designed to reduce public issuance friction. While Phase I reforms may not eliminate cost disparities entirely, even incremental reductions could make public issues viable for smaller firms. Narrowing India’s issuance cost gap with global peers will depend on sustained regulatory simplification and digital platforms achieving economies of scale.
Why 2026 Is the Critical Year
Why does all of this hinge on 2026?
Because timing matters.
The Reserve Bank of India has shifted into an accommodative stance, cutting rates materially since early 2025. Lower borrowing costs make bond issuance attractive, while subdued inflation supports investor appetite for fixed income.
At the same time, banks have been slow to transmit rate cuts fully, creating space for bond markets to compete directly for corporate funding.
If reforms embed during this window—before rates rise or liquidity tightens—the bond market can scale structurally. If not, momentum may fade.
The Viksit Bharat Connection
NITI Aayog positions corporate bond market deepening as a cornerstone of Viksit Bharat 2047—India’s ambition to become an upper-middle to high-income economy by mid-century. Expanding the bond market sevenfold isn’t just a financial target; it’s a developmental necessity. Large-scale infrastructure projects require patient, long-term capital. When banks dominate lending, economic slowdowns often stall projects. A deeper bond market diversifies funding sources, allowing infrastructure to access capital consistently across cycles and improving overall capital allocation.
Equally important, well-functioning corporate bond markets offer institutional investors attractive risk-adjusted returns, encouraging capital to flow into productive sectors rather than remaining trapped in government securities or narrow asset classes. This diversification reduces systemic concentration and limits asset bubbles.
Most critically, broader market access promotes financial inclusion. For a middle-class saver with ₹10 lakh, corporate bonds can bridge the gap between low-yield deposits and volatile equities—offering higher income potential with relatively lower risk and professional credit oversight.
Obstacles and Challenges
Despite its ambition, the roadmap faces meaningful hurdles. Regulatory coordination remains complex, with multiple authorities guarding overlapping jurisdictions. Aligning priorities across regulators will require sustained political and institutional will. Institutional investor constraints pose another challenge: insurers and pension funds remain restricted to high-rated securities, a rule designed to protect beneficiaries but one that limits market depth and risk-taking flexibility.
Secondary market liquidity is perhaps the toughest problem. Large institutions naturally adopt buy-and-hold strategies to match long-term liabilities, leaving little incentive to trade. Until participation broadens or market-making incentives evolve, liquidity will lag primary issuance growth.
Tax complexity further complicates progress. Interest income is taxed at marginal rates, while capital gains face layered rules. Simplification would help—but demands coordinated policy action.
Realistic Expectations for 2026 and Beyond
Can India’s corporate bond market realistically grow from ₹53.6 trillion to ₹100–120 trillion by 2030? Possibly—but only with consistent execution. The policy intent is clear and supportive, yet Phase I of the roadmap (2026–2027) is unlikely to deliver overnight transformation. Regulatory coordination will improve in steps rather than leaps. Digital infrastructure will expand, but unevenly. Issuance costs may decline, though not dramatically. Retail participation will rise, but institutions will continue to dominate volumes.
That said, incremental progress compounds. Together, these changes alter incentives. Public bond issuances become marginally more viable for issuers. Retail investors gain practical access through digital platforms. Secondary market participation improves as transparency and ease of access increase. Over a six-year horizon, these small shifts can meaningfully deepen market depth.
The RBI’s accommodative stance provides a temporary tailwind. Lower rates support bond issuance and liquidity. But this window won’t last forever—making 2026–2027 a critical period to lock in structural reform.
Conclusion: A Critical Inflection Point
NITI Aayog’s roadmap outlines a credible and thoughtfully sequenced path toward deepening India’s corporate bond market. The three-phase framework, spread over six years, recognises a fundamental truth: institutional transformation cannot be rushed. Phase I focuses on removing friction and building foundations, while Phases II and III aim to scale participation, diversify instruments, and embed digital infrastructure. If executed well, the end state is a mature bond market with varied issuers, active secondary trading, and broad-based investor access.
For retail investors, the outlook steadily improves. Each phase lowers barriers cost, complexity, and access making bond investing more transparent and practical. Platforms such as Altifi already reflect this transition, offering early glimpses of what a more inclusive bond ecosystem could look like. By 2030, Indian savers may enjoy corporate bond access approaching global standards.
Corporates also stand to benefit. Public bond markets could become viable for firms previously excluded by cost and complexity. SMEs may tap dedicated platforms, while infrastructure developers gain access to long-duration capital aligned with project lifecycles.
Yet 2026 is pivotal. Policy intent must translate into execution. Digital systems must scale, and issuer behaviour must adapt. The opportunity is real but outcomes will depend on follow-through.