IFSCA says GIFT City bond market remains institution-led, retail access to evolve over time

K Rajaraman, Chairman of International Financial Services Centres Authority (IFSCA), said the bond market at GIFT City has largely developed as an institutional market, with gradual steps being taken to improve transparency and investor protection as the ecosystem matures.Rajaraman said bond listings at GIFT City began nearly five years ago and are hosted on NSE IX and India INX. These issuances are mainly from Indian corporates tapping offshore markets. “If you look at the nature of the market, it is a largely institutional market,” he said, adding that issuers and investors are typically large institutions, intermediated by international banks.

He noted that resident Indian investors cannot invest in bonds that originate in India and are listed offshore. As a result, the investor base primarily includes foreign institutions, entities based in GIFT City, and non-resident Indians. In FY24–25, around 57 bond issuances took place, raising close to $7 billion. Total outstanding bond issuances at GIFT City stand at about $68 billion, of which nearly $16 billion are green, social, and sustainable bonds.

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On investor safeguards, Rajaraman said IFSCA has strengthened disclosure and rating norms. “The most important element of investor protection is to ensure that the investor gets adequate information,” he said. From April this year, all bond issuers have been required to obtain ratings from registered credit rating agencies at GIFT City, with the option of additional international ratings. Issuers must also disclose the use of proceeds and material information such as interest payments, buybacks, redemptions, and cancellations. Exchanges are mandated to disclose any default events.Addressing taxation, Rajaraman clarified that Indian retail investors are subject to domestic tax laws. For foreign investors and NRIs, GIFT City offers a concessional withholding tax regime. He said the 9% withholding tax on bond interest is a key feature for offshore investors compared with higher rates under various tax treaties.

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Looking ahead, Rajaraman said the bond market experience for retail investors will depend on liquidity and price transparency. “Good bond markets are those where there is liquidity and transparency in pricing,” he said. Since most issuances are in large ticket sizes, the market is expected to remain institution-led for now. However, mechanisms such as bond fractionalisation through exchange-traded funds and tokenisation are being explored and could develop over the coming years, alongside broader bond market reforms discussed in reports by NITI Aayog.

For the full interview, watch the accompanying video

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