The bond market in India is no longer playing catch-up. Instead, it is setting benchmarks. India’s fixed income landscape is being redefined as the world gravitates towards stability. The market, which was once dominated by government issuances and institution-led investors, is now transforming into a multi-tiered, tech-enabled one. Everyone, from large-scale issuers to curious retail investors, are exploring the promise of bonds.
2025 marks a pivotal moment in the evolution of corporate bonds. The current macroeconomic environment is characterized by cautious global optimism, central bank rate pivots, and risk rebalancing by investors. This is working in India’s favour. Regulatory clarity, stronger credit quality, and lower interest rates are pushing corporate bonds into the spotlight.
This is not just a short-term rally. It’s a structural shift. Corporate bond issuances are scaling new highs, online platforms are expanding access, and regulatory reforms are ensuring that the market matures in a sustainable way. If the last decade was about laying and strengthening the groundwork, 2025 is about accelerating forward.
Let’s delve deeper into the size, growth trajectory, record trends, and what lies ahead for India’s corporate bond market.
Growth & Size of the Indian Bond Market in 2025
India’s bond market, comprising government securities (G-Secs), state development loans (SDLs), and corporate bonds, stood at approximately ₹226.3 trillion (approximately USD 2.66 trillion) as of December 2024. This marks a more than threefold increase from ₹68 trillion in 2014. During the same period, corporate bonds grew from just under ₹16 trillion to ₹51.58 trillion. The break-up of the market size is:
- G-Secs: ₹105.9 trillion
- SDLs: ₹59.27 trillion
- Corporate Bonds: ₹51.58 trillion
- Other debt instruments: ~₹9.5 trillion
A combination of growing capital needs, policy support, and institutional demand has driven this growth. However, despite this progress, India’s bond market remains underdeveloped in global terms. India’s total bond market, comprising government and corporate debt, is estimated to be around 70% of the country’s GDP. This is significantly lower compared to around 225% in the U.S. and U.K., around 260% in Japan, and around 100% in China.
Crucially, the private corporate bond segment remains secondary to bank credit in India. India’s corporate bond market remains relatively shallow, accounting for around 18% of GDP—a low share compared to over 100% in the U.S., around 85–90% in South Korea, and approximately 36% in China. However, with banks becoming more selective in their credit deployment, capital-hungry corporates, as well as savvy investors, are turning to bonds. It is a sign of healthy rebalancing for the long-term evolution of Indian capital markets.
Record-High Corporate Bond Issuance in India: FY25 Trends
FY25 marked a milestone year. Indian companies raised over ₹9.9 trillion through corporate bond issuance. This is the highest ever, surpassing ₹8.6 trillion in FY24. During Q1 (April–June 2025) ₹2.79 trillion were raised by Indian corporate through private placements. The total issuances in FY26 are expected to be around ₹11 trillion.
This surge builds on a consistent upward trend. From ₹3.3 trillion in FY14 to nearly triple that in FY25, corporate bond issuances are steadily raising their share of India’s financial growth story. Importantly, the rise is not driven by short-term, opportunistic placements. It reflects a growing comfort with the bond market as a long-term capital raising mechanism.
So, what has changed? For one, the yields are quite attractive. Secondly, regulatory changes have made issuances simpler and more efficient. And finally, a broader investor base, including mutual funds, insurance companies, FPIs, and retail investors, has made the market much more liquid and vibrant.
Let’s examine the major shifts in detail.
RBI’s Rate Pivot: Between February and June 2025, the Reserve Bank of India implemented three repo rate cuts, totalling 100 basis points. This shift towards monetary easing has resulted in lower benchmark yields, encouraging corporates to raise debt on favourable terms. Issuers view this as an opportunity to secure long-term financing or refinance earlier debts at lower costs.
Yield Advantage: Even with the interest rates falling, bonds continue to offer a healthy spread over fixed deposits. Even for AAA to A-rated instruments, this spread ranges from 20 to 30 basis points, making them attractive to both institutional and retail investors.
Shift from Bank Credit: Following the COVID-19 pandemic, banks have adopted more cautious lending standards, particularly for long-term exposures. Combine this with the growing trend of financial disintermediation, and more corporations are turning to the bond market for capital. Bonds offer greater flexibility, competitive rates, and often involve less procedural overhead than traditional bank loans.
Strengthened Creditworthiness: Indian corporates are entering this cycle with significantly improved financials. Deleveraging, healthier profit margins, and better governance are leading to rating upgrades. This enables corporations to raise capital at lower costs. The implementation of the Insolvency and Bankruptcy Code (IBC) has further strengthened lender confidence.
Key Drivers of Growth in India’s Corporate Bond Market in 2025
The corporate bond market in 2025 is benefiting not just from favourable interest rates. Various other factors, such as ecosystem upgrades, investor awareness, and policy nudges, are all converging to strengthen the market’s foundation.
Broader Participation: While institutional players, such as mutual funds, pension funds, and insurance companies, remain active, the growth story lies more in diversification. FPIs have invested ₹1.21 trillion in corporate bonds in FY25, a jump of 11.4% from the previous year. Retail investment, although still in its early stages, is growing due to the increased availability and acceptance of online bond platforms and digital intermediaries.
SEBI’s Regulatory Push: SEBI has been a major catalyst, implementing reforms that have enhanced both issuer accountability and investor trust.
- Enhanced Disclosure Norms: Issuers have to provide detailed and timely information on financial performance, repayments, and covenants.
- Market-Making Frameworks: To address illiquidity, SEBI has encouraged institutions to act as market makers, providing consistent buy-sell quotes and reducing bid-ask spreads, thereby improving tradability.
- E-Bidding and Unified KYC: A unified KYC system and digital bidding have significantly eased participation in primary placements.
Together, these steps have streamlined the market and reduced information asymmetry, which is crucial for long-term investor engagement.
Digital Platforms and Retail Access: Today, retail investors can browse, compare, and invest in bonds, much like how they would invest in equities. Online bond platforms offer curated listings, analytical tools, and investor education. They generally provide comprehensive information on the listed bonds, including issuer information, credit ratings, and risk assessments. Even investors from smaller cities can now participate in bond markets.
Fintech Enablers: The backend has evolved as well. Fintech platforms now support everything from digital onboarding and instant KYC to risk profiling and real-time portfolio analytics. This has made fixed-income investing more accessible and transparent, and also reduced friction.
Case for Mid-Sized Issuers: Today, even mid-sized companies are exploring bond placements, thanks to streamlined issuance norms and increased clarity in ratings. There is growing interest in enabling this next rung of issuers, despite some challenges in terms of credit enhancements and demand assurance.
The stage is set for bonds to move beyond blue-chip names and into the broader corporate spectrum.
Challenges Faced by the Indian Debt Market in 2025
Despite all the above advancements, India’s corporate bond market continues to face various persistent challenges that need long-term structural improvements.
Low Liquidity in Secondary Markets: Poor secondary market trading remains one of the most significant challenges. The daily turnover in corporate bonds is approximately 1.9% of outstanding issuances. This impedes price discovery and creates exit uncertainty, more particularly for retail investors. It also impedes price discovery.
Concentration Risk: The majority of issuances continue to be concentrated in AAA-rated PSUs on the supply side and financial institutions on the demand side. CPSUs account for over 25% of issuance. More than 80% of issuers are rated AA or higher, and 97% fall within the top-rated bracket.
On the demand side, the market is dominated by institutional players. Approximately 96% of corporate bonds are held by non-retail investors, including banks, mutual funds, insurance companies, pension funds, corporates, and foreign portfolio investors (FPIs).
This concentration, both in issuer profiles and investor categories, results in a somewhat narrow investible universe, making it challenging for retail investors seeking higher returns to diversify their exposure.
Limited Retail Penetration: Despite progress on the fintech front, retail participation remains under 5% of the bond market. Ticket sizes, ignorance of taxation rules, and lack of familiarity with credit risk assessment are the major barriers. Investor awareness campaigns and user-friendly tax guidance could help.
Credit Enhancement Gaps: For mid-sized and first-time issuers, accessing the bond market remains somewhat challenging. Credit guarantee schemes or innovative enhancement structures, like partial guarantees or collateral-backed offerings, may help bridge the gap. This will bring more diversity to the market.
Tax Disparity: Gains on debt instruments are taxed less favourably than those on equities. Rationalization of tax treatment, especially for long-term bond holdings, could attract more investor participation.
2025 Outlook for India’s Corporate Bond and Fixed Income Markets
2025 might well be the year when India’s bond market finally starts performing closer to its potential. Several factors reinforce this belief:
Global Index Inclusion: Indian bonds have been included in JP Morgan’s GBI-EM index. FTSE’s EMGBI is slated to follow by September 2025, and Bloomberg is likely to follow in early 2026. This could trigger passive inflows of $30-40 billion per year, potentially reshaping the market’s depth and visibility.
Rising Domestic Appetite: Domestic investors, from pension funds to family offices, are increasing their allocations to bonds. Bonds are now viewed not just as safer investments, but also as strategic tools for income generation, goal planning, and risk balancing.
Blending Bonds into Long-Term Portfolios: Structured portfolios, bond ladders, and passive bond funds are gaining currency among wealth managers. This indicates a slow but steady shift toward fixed income becoming a core building block in asset allocation.
Infrastructure and Climate Financing: As India scales up spending on energy transition and infrastructure, corporate bonds will be a key funding channel. Blended finance, ESG-labeled bonds, and green bond frameworks are expected to dominate the new wave of issuances.
Conclusion
India’s bond market is at a defining juncture, where capital demand, digital transformation, and investor behaviour intersect. From ₹68 trillion in 2014 to ₹226.3 trillion in December 2024, the journey has been remarkable. But it’s not just about the scale of growth. The quality of issuances, transparency of online platforms, and sophistication of investor tools reflect a maturing ecosystem.
The record corporate bond issuances of FY25 are not just a data point; they are a signal. India is transitioning from a bank-dominated credit delivery model to a more inclusive, market-based structure. The bond market is no longer just an alternative. Rather, it is becoming a parallel engine driving growth.
Still, challenges remain. Market illiquidity, retail investor hesitancy, and credit access for smaller firms require sustained attention. Taxation parity between equity and bonds, improved rating mechanisms, and targeted investor education can help further accelerate the system.
What is becoming increasingly clear is that fixed income is now a crucial component of the mainstream investment narrative. For every investor seeking predictable returns in an otherwise uncertain world, the bond market offers a balanced solution.
The time to act is now. Whether you are an institutional investor, wealth manager, or retail investor entering the space, consider:
- Exploring digital platforms that offer curated bond opportunities across tenures and ratings.
- Balancing the equity risk with fixed income instruments.
- Engaging with advisors and platforms that can align bond investments with your financial goals.
Explore. Compare. Invest. The Indian bond market’s next chapter is being co-authored by every issuer, investor, and enabler who believes in long-term value.
The future of fixed income in India is here, and it’s only the beginning.
FAQs
What is the size of the Indian bond market in 2025?
As of mid-2025, the Indian bond market stands at approximately ₹226 lakh crore (approximately USD 2.6 trillion), encompassing both government and corporate debt. This includes government securities (G-Secs), State Development Loans (SDLs), and corporate bonds.
How much did Indian companies raise through corporate bonds in FY25?
Indian companies raised a record ₹9.9 lakh crore via corporate bond issuances in FY25, marking a strong 28% year-on-year increase.
Why is the corporate bond market growing in India?
The growth is driven by several structural and market-level factors:
- Rising demand for fixed-income investment alternatives
- Regulatory reforms are improving transparency and access
- Anticipated rate cuts and bond index inclusion are boosting investor interest
- Platforms like Jiraaf making corporate bond investment retail-friendly
How can retail investors invest in corporate bonds in India?
Retail investors can now access corporate bonds India-wide through:
- SEBI-regulated bond platforms like Jiraaf,
- RBI Retail Direct for G-Secs and State Development Loans India
- Direct demat-based purchases via brokers for listed bonds
What are the benefits of investing in fixed-income securities in India?
Investing in fixed income securities offers:
- Predictable returns and capital preservation
- Better post-tax outcomes compared to FDs (especially for high earners)
- Portfolio diversification across the Indian debt market
- Options for short-term or long-term tenures with varying risk profiles
What challenges does the Indian corporate bond market still face?
Despite rapid growth, the market faces these hurdles:
- Low liquidity: Only ~3.8% of outstanding bonds trade monthly
- Limited retail participation (under 2%)
- High reliance on institutional investors (~96% of holdings)
- Inadequate credit depth outside top-rated issuers
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