OBPP (Online Bond Platform Providers) is a SEBI-registered platform that facilitates the buying and selling of bonds in the Indian market. We have shared content around various debt-based alternative investments and some of these investments fall in the unregulated space while some are in the regulated space. OBPP platforms can only deal in the regulated space.
In this article, we shall be covering more of the legal and regulatory compliance to be adhered to by these OBPPs introduced by SEBI on November 14, 2022, and what it will mean for you as an investor.
By the way, if you prefer watching videos rather than reading articles, we also have made a video. (Recommended to watch at 1.5X)
Understanding OBPP Platforms
OBPP refers to Online Fintech companies operating in the debt market and offering different types of debt securities to retail investors. OBPPs leverage technology to simplify the bond investment process and make it more accessible for retail investors.
These debt securities can be anything like:
Securitized Debt Instruments (SDIs)
Government Securities (like T-Bills)
State Development Loans (SDLs)
Sovereign Gold Bonds (SGBs)
Corporate Listed Debt, etc
Fintech companies who want to operate as an OBPP, are required to get registered with SEBI as a broker in the debt segment and subsequently apply to a stock exchange to operate as an OBPP.
Why did SEBI bring OBPP Regulation?
In recent years, SEBI observed a surge in the involvement of retail investors in the debt markets. This increased participation was largely facilitated by Fintech companies, which significantly enhanced convenience and user-friendliness for retail investors. In addition, these platforms also reduced the minimum investment amount to as low as ₹1,000 after favorable SEBI rules. Before this, only HNIs and Institutional Investors would constitute a major portion of the market.
However, there were certain issues in this space that were not being transparently addressed by the Fintech players, some of them are:
Offering both Listed and Unlisted Debt on the platform made it difficult for investors to distinguish between them.
No standard guidelines among all Fintech players to be followed around marketing, compliance, KYC norms, etc.
No framework to resolve complaints.
Comparing high-yielding risky instruments with safer options without giving proper disclosures.
SEBI, hence proactively introduced the OBPP Regulation to ensure that the rights of the investors are being safeguarded.
SEBI Regulations for OBPPs
Each OBPP is required to comply with the Master Circular issued by SEBI. You can access the circular here. Below are some of the key aspects of the circular to be followed:
Previously only listed debt securities and debt securities that were about to be listed by a public offering were allowed. SEBI through a revised circular on June 16, 2023, added Listed Municipal Debt, SDIs, G-Secs, SDLs, Treasury Bills, and other regulated products that can be offered by an OBPP. You can access the revised circular here. All of these products also have to be rated by a established rating agency in India.
Restrictions on the Sale of other products
An OBPP is restricted from offering any products other than those permitted by SEBI (discussed above) either through its website or a related holding company and even restricts the platform from having any 3rd party link (on its website) that can facilitate investments in unregulated products.
This means that these platforms cannot promote any unregulated investments like invoice discounting, direct asset leasing, unlisted corporate debt, etc.
An OBPP is required to get registered with SEBI as a broker in the debt segment. SEBI through the circular has delegated the power to monitor the operations of fintech companies to Stock Exchanges (NSE & BSE)
Request For Quote Platform (RFQ)
RFQ is an execution and settlement platform of debt securities introduced by SEBI in October 2022. This was done to bring in more transparency in the Over-the-Counter trades. NSE operates through CBRICS and BSE through NDS. You can access the RFQ circular here.💡Big Congrats to Grip Invest which became the first OBPP platform (on 6th Oct 2023) to fully integrate with the NSE RFQ platform for end-to-end order execution. We believe more platforms will follow soon.
Complaints of an investor must be addressed by the OBPP within 30 days from the date of issue and it is required to disclose the number of complaints raised, resolved and open complaints. SEBI has designated SCORES as a platform to register the complaints of an investor.
The following details are required in case of a complaint against a debt broker on SCORES.
Orders placed on the RFQ platform shall be sent to NSCCL for trades on NSE and ICCL for trades on BSE, for settlement clearing-house functions and securities will then be credited into the demat account of bond-holders.
Platforms are responsible for maintaining adequate safeguards to ensure that unforeseen events are kept at a minimum level. The indemnification responsibility shall be of the issuer company itself.
Relevant Management Requirement
The OBPP platform is supposed to appoint a Company Secretary as a Compliance Officer and also appoint two qualified key managerial personnel with experience of at least 3 years in the securities market.
The same level of Transparency across platforms.
All OBPP platforms have to showcase the below info for every security they list on their platform increasing transparency and comparability.
Platforms registered as OBPP
Below is the list of platforms registered as OBPP and the products they offer along with the minimum investment requirement and expected IRR returns.
|Platform||Products||Min. Investment||Avg. Returns (IRR)|
|Grip Invest (also integrated with the NSE RFQ system)||Listed Debt, Securitized Debt Instruments, P2P Lending, Invoice Discounting||₹ 1,000||8% - 18%|
|IndiaBonds||Listed Debt, Market Linked Debentures, G-Secs, SDLs, SGBs||₹ 10,000||7% - 14%|
|Wint Wealth||Listed Debt, Market Linked Debentures, SGBs, Fixed Deposit||₹ 1,000||7% - 11%|
|BondsIndia||Listed Debt, Market Linked Debentures, G-Secs, Fixed Deposits||₹ 1,000||7% - 12%|
|GoldenPi||Listed Debt, Market Linked Debentures, Fixed Deposits, SGBs||₹ 1,000||7% - 12%|
|BondsKart||Listed Debt, Market Linked Debentures, G-Secs||₹ 10,000||8% - 12%|
|The Fixed Income||Listed Debt, Market Linked Debentures, SGBs, G-Secs||₹ 10,000||7% - 11%|
|Altifi||Listed Debt, Market Linked Debentures, SGBs||₹ 1,000||7% - 11%|
|Incred Money||Market Linked Debentures, Listed Corporate Debt||₹ 10,000||8% - 12%|
|Aspero||Listed Debt, Market Linked Debentures, Fixed Deposits, SGBs||₹ 300||8% - 14%|
To sum it all up, the introduction of the OBPP Regulation by SEBI marks a significant step in regulating fintech platforms operating in the debt market. This shall help in streamlining the business operations, ensuring consistency across platforms and providing a secure and efficient environment for retail investors. As the fintech industry continues to grow, these regulations play a vital role in safeguarding the interests of all stakeholders involved.
If you are a first-time investor entering into alternative investments, we urge you to not get swayed by high yields of unregulated products, try out your experience on OBPP platforms, get more confident with how things work and then evaluate other options available to you from an investment point of view.
Hope you enjoyed the article, if you think there is something factually incorrect or if you know of any other OBPP platforms missing from this article, please send me a message here or message us on our Whatsapp Community which you can join here.
Please note that this is an opinion blog and not official research advice. I am not a registered RIA in India, and none of these views reflect those of my current employer. This blog aims to promote informed decision-making and does not discourage you from investing in any deals.
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