Description

Amendment to SEBI regulations allowing issuers to offer incentives to specific investor categories including senior citizens, women, defense personnel, and retail individual investors in non-convertible securities issues.

Summary

SEBI has amended the Issue and Listing of Non-Convertible Securities Regulations, 2021 to permit issuers to offer incentives to specific categories of investors. The amendment introduces the definition of ‘Retail Individual Investor’ and allows issuers to provide benefits such as additional interest or discounted pricing to senior citizens, women, serving and retired defense personnel, widows/widowers of deceased defense personnel, and retail individual investors applying for debt securities up to Rs. 2 lakh.

Key Points

  • New definition added: ‘Retail Individual Investor’ means an investor who applies or bids for debt securities up to a value of Rs. 2 lakh
  • Issuers can now offer incentives to priority investor categories including senior citizens, women, defense personnel (serving and retired), and spouses of deceased defense personnel
  • Incentives may include additional interest rates or options to purchase securities at prices lower than the issue price
  • Incentives are only applicable to first-time allottees of debt securities
  • Once debt securities are transferred or transmitted after allotment, the incentive benefit will not continue
  • Amendment effective from date of publication in the Official Gazette (January 20, 2026)

Regulatory Changes

Amendment to Regulation 2(1): A new clause (chha-chhak) has been inserted defining ‘Retail Individual Investor’ as an investor applying for debt securities worth up to Rs. 2 lakh.

Amendment to Regulation 31: Two new provisos have been added:

  1. First Proviso: Issuers are permitted to offer incentives to:

    • Senior citizens
    • Women
    • Serving defense personnel
    • Retired defense personnel
    • Widows or widowers of deceased defense personnel
    • Retail Individual Investors (individuals)
    • Any other category of investors as specified by SEBI from time to time

  2. Second Proviso: Incentives shall only be provided to those to whom debt securities are allotted for the first time. The incentive will not be available upon subsequent transfer or transmission of the securities.

Compliance Requirements

  • Issuers of non-convertible debt securities may structure their public issues to include differential pricing or interest rates for eligible investor categories
  • Issuers must ensure incentives are provided only at the time of first allotment
  • Documentation and offer documents must clearly specify the incentive structure for different investor categories
  • Issuers must have mechanisms to identify and verify eligible investor categories (senior citizens, women, defense personnel, etc.)
  • Transfer agents and registrars must ensure incentives are not extended post-transfer/transmission of securities

Important Dates

  • Notification Date: January 20, 2026 (Mumbai)
  • Effective Date: January 20, 2026 (date of publication in the Official Gazette)
  • Applicable to: All public issues of non-convertible debt securities launched after this date

Impact Assessment

Market Impact:

  • Likely to increase retail participation in corporate debt markets by making debt securities more attractive to individual investors
  • May lead to better price discovery and deeper debt markets with broader investor base
  • Could incentivize issuers to design retail-friendly debt offerings

Investor Impact:

  • Positive for retail investors, senior citizens, women, and defense personnel who will have access to better yields or discounted pricing
  • Promotes financial inclusion by recognizing priority investor segments
  • Retail investors with investments up to Rs. 2 lakh can benefit from preferential treatment

Issuer Impact:

  • Provides flexibility to issuers to attract diverse investor segments
  • May help in achieving wider distribution of debt securities
  • Issuers need to factor in cost of incentives in pricing and structure

Operational Impact:

  • Intermediaries need to update systems to identify eligible investor categories
  • Additional compliance and verification requirements for determining eligibility
  • Transfer agents must track first-time allottees versus secondary holders

Impact Justification

Enables issuers to provide incentives to specific investor categories in debt securities, promoting financial inclusion and making debt markets more accessible to retail and priority segments