SEBI Consultation Paper on Introduction of Fixed Income Channel Partners (FICPs) for Distribution of Fixed Income Securities through Online Bond Platform Providers (OBPPs) 2026

Why Is SEBI Proposing Fixed Income Channel Partners?

The proposed FICP framework is aimed at solving a distribution problem rather than creating another product category. SEBI says the objective is to enable the enlistment of Fixed Income Channel Partners on stock exchanges and their appointment by Online Bond Platform Providers so that permitted fixed income securities can reach a broader class of investors.

The backdrop is a rapidly expanding corporate bond market. Outstanding corporate bonds increased from about ₹17.5 trillion at the end of FY15 to more than ₹60 trillion as on July 31, 2026, representing a CAGR of around 12%. Listed corporate bonds account for about ₹46 trillion, or approximately 76.6% of the outstanding market.

Debt-market fundraising has also become significant. During FY21 to FY25, average annual fundraising through the debt market was around ₹8 trillion, while FY26 debt issuances mobilised ₹9.1 trillion—nearly twice the amount mobilised through equity. However, SEBI notes that access remains concentrated among institutional investors, creating under-penetration among retail investors.

What Has the OBPP Model Already Changed?

SEBI notes that the OBPP framework has made debt investing easier by allowing investors to access information on listed debt securities, compare investment opportunities and complete transactions electronically. The framework has reduced operational barriers that previously limited retail participation in corporate bonds.

The effect is visible in trading activity. Trades on the Request for Quote (RFQ) platform increased from 2.76 lakh in FY 2024–25 to 17.84 lakh in FY 2025–26, an increase of about 546%. SEBI attributes a significant part of that expansion to increased retail participation in debt securities through OBPPs.

Yet SEBI identifies a geographic gap: retail investors outside major urban centres, particularly in Tier II, Tier III and rural locations, are still comparatively difficult to reach.

Why Does SEBI Look to the Mutual Fund Distributor Model?

During stakeholder consultations, SEBI was told that the Mutual Fund Distributor (MFD) model has been useful in increasing investor awareness and access in Tier II and Tier III locations. According to the consultation paper, MFDs often explain products in local languages, assist with documentation and build investor trust through regular contact.

SEBI states that much of the growth in retail mutual-fund folios from Tier II and Tier III locations came through distributor channels rather than direct online platforms. That observation led to the idea of adapting a comparable assisted-distribution structure to fixed income securities, while accounting for the distinct risks of direct debt investment.

The proposed framework was subsequently discussed by a Working Group comprising representatives of Market Infrastructure Institutions, AMFI, the OBPP Association and other stakeholders. The Working Group recommended introducing FICPs on the lines of Mutual Fund Distributors. The proposal was then considered by the Corporate Bonds and Securitization Advisory Committee (CoBoSAC) before being placed for public consultation.

What Exactly Is SEBI Proposing?

SEBI proposes to introduce an FICP framework through amendments to the applicable circulars or master circulars. The proposed channel would support the distribution of fixed income securities in India through OBPPs. At this stage, however, the framework remains a consultation proposal and stakeholders are being asked for views on the detailed architecture.

Who Would Qualify as an FICP?

Eligibility for Individuals

The proposal allows an individual, including a sole proprietor, to become an FICP if the person satisfies all specified criteria. The requirements are designed to combine basic suitability standards with a specific securities qualification.

Eligibility for Non-Individual Entities

Partnership firms, corporates and other non-individual applicants would have a different compliance structure. All partners or directors would need to satisfy the individual eligibility requirements covering citizenship, age, education, integrity, reputation, fraud or dishonesty convictions and insolvency. In addition, the entity would need at least one partner, director or employee engaged in distribution activity who holds the required NISM certification. Only such certified persons would be permitted to interface with clients.

The constitutional documents would also need to permit the entity to act as a distributor of fixed income securities. In other words, the partnership deed or Memorandum of Association would need an appropriate enabling object clause.

Can Stock Brokers Become FICPs?

The proposal specifically states that stock brokers who are not registered in the debt segment of a stock exchange may act as FICPs with any OBPP.

Special Treatment for Mutual Fund Distributors

AMFI-registered Mutual Fund Distributors would be eligible to apply as FICPs without paying any applicable enlistment fee, subject to passing the relevant NISM certification. This is intended, in part, to grandfather an existing distributor ecosystem that has already undergone AMFI registration and screening.

What Happens When the NISM Certificate Expires?

The proposal states that the certificate held by an FICP would need to be re-validated before its existing validity expires, either by passing the relevant NISM certification examination or through successful completion of a Continuing Professional Education programme, which SEBI says would be explored subsequently.

How Would FICP Enlistment Work?

Under the proposal, an FICP would need to enlist with any one recognised stock exchange. The application could be submitted directly by the FICP or by an OBPP on the FICP’s behalf.

The proposal also expects exchanges to exchange enlistment data, including dis-enlistments and disciplinary actions, with one another immediately through APIs.

What Conditions Would Apply After Enlistment?

FICP enlistment would remain valid for three years, subject to continued eligibility. Renewal would be available on an application made at least 30 days before expiry. Stock exchanges would prescribe nominal enlistment and renewal fees broadly similar to those currently applied to MFDs. Non-payment after due notice could result in suspension, with continued default potentially leading to cancellation. The proposed fees would not be refundable.

FICPs would also need to provide office and contact details, together with PAN and details of directors, partners and promoters, both to the stock exchange during enlistment and to OBPPs at the time of appointment. These details would need to be updated promptly whenever changes occur.

How Would an OBPP Appoint an FICP?

Once the stock exchange grants the FICP an enlistment number, the FICP may approach one or more OBPPs for appointment. The proposal does not make the FICP exclusive to a single OBPP; an FICP enlisted with exchanges may be appointed by multiple OBPPs.

Before making an appointment, the OBPP would have to conduct independent due diligence. This includes Know Your Distributor (KYD) and In-Person Verification (IPV) in accordance with KRA guidelines and along the lines of the MFD framework. If adverse findings arise, the OBPP would need to immediately notify the stock exchange where the FICP is enlisted.

The OBPP and FICP would enter into a written agreement in the form prescribed by the exchange in consultation with the OBPP Association. The agreement would cover matters such as activities, responsibilities, confidentiality, commission sharing and termination.

Whenever an FICP is appointed or its appointment is cancelled, the OBPP would have to notify the stock exchange immediately. In the case of cancellation, the OBPP would also provide the reason and the documents required by the exchange. The OBPP would also have to display the details of both appointed and cancelled FICPs on its website.

What Are the Proposed Obligations of OBPPs?

The consultation paper places substantial responsibility on the OBPP. Under the proposal, OBPPs would be responsible for the acts and omissions of appointed FICPs and their employees relating to distribution, while also carrying out due diligence, supervision, monitoring and related compliance functions.

The OBPP would also be expected to maintain regular contact with clients onboarded through FICPs, particularly those in remote locations, to gather feedback and identify possible malpractice.

If irregularities are detected, the OBPP may, depending on the circumstances, withhold money otherwise due to the FICP until an investor complaint is resolved, alert investors in the FICP’s area through email or digital communication, inform stock exchanges for possible dis-enlistment, or take any other appropriate investor-protection measure.

Investor Grievances

The OBPP would endeavour to resolve an investor grievance or complaint against an FICP within 21 calendar days from receipt of the complaint. The OBPP must also ensure that an FICP does not offer any unregulated product or security, directly or indirectly, or engage in unregistered activities while distributing fixed income products.

Prohibition on Sales Incentives in Kind

OBPPs would be prohibited from offering in-kind incentives to FICPs for achieving sales targets. The proposal specifically mentions gift vouchers, actual gifts such as electronic gadgets and entertainment, whether provided directly or through an associate or group company.

Other Important OBPP Restrictions

All client-facing documents such as deal slips, contract notes and invoices would have to be issued directly by the OBPP. In addition, the OBPP would have to ensure that FICPs do not distribute unsecured perpetual debt instruments such as AT1 bonds through their platforms.

What Would FICPs Be Allowed to Do?

The proposed FICP role is primarily one of assisted distribution. An FICP would facilitate distribution of debt securities permitted to be offered by OBPPs, whether already listed or proposed to be listed. The proposed assistance may include client onboarding, documentation, KYC and transaction facilitation.

Access to the online bond platform would be limited to displaying products offered by the OBPP. Client orders would be routed and reported directly through the OBPP platform.

What FICPs Cannot Handle

FICPs would be expressly prohibited from handling client funds or securities. They would also be prohibited from receiving or paying client money or securities in their own name or account. They could not issue deal slips, contract notes or invoices to clients.

Disclosure at the FICP’s Office

An FICP would have to display its exchange enlistment letter at its office together with a mandatory statement identifying the relevant stock exchange, using the proposed tagline “Exchange (i.e. Name of Stock Exchange) Enlisted,” and also display the names of the OBPPs that appointed it. An individual FICP without a fixed office would instead be required to produce the details to investors or officials upon request.

Conduct and Sales Practices

FICPs would need to comply with the Code of Conduct prescribed by exchanges in consultation with the OBPP Association and provide periodic disclosures or undertakings to the OBPP on compliance.

The proposal is also explicit about mis-selling risk. Financial incentives must not become the basis for recommending a particular fixed income product through an OBPP. FICPs would be expected to promote ethics and integrity and discourage conflicts of interest, mis-selling, aggressive sales practices and other inappropriate conduct designed to meet sales targets at the expense of fiduciary duties of care, diligence and loyalty.

For advertisements relating to fixed income securities, the FICP would have to follow the advertisement code prescribed for OBPPs, as amended from time to time.

How Would the Proposed Fee and Commission Structure Work?

The consultation paper proposes that an FICP may receive remuneration only from the appointing OBPP. The FICP would not be allowed to levy or collect any amount directly from a client.

Remuneration would take the form of commission sharing by the OBPP. The commission would be paid out of brokerage, other income or fees earned by the OBPP from the relevant fixed income securities.

The proposal therefore creates two separate concepts: the FICP receives remuneration from the OBPP, while the total commissions, fees or brokerage charged to the client would be subject to a proposed maximum of 2.5% of the value of investment.

What Would Recognised Stock Exchanges Have to Do?

Stock exchanges would be central to the proposed FICP governance architecture. They would assign an enlistment number to each FICP after verifying eligibility.

Each exchange would maintain a database containing the FICP’s PAN, associated OBPPs, withdrawal of enlistment and disciplinary actions such as suspension or cancellation. For partnerships and body corporates, the database would contain the FICP’s PAN as well as the PAN of all partners or directors. With the exception of PAN-related information, the specified database details would be available on the exchange website.

Grievances received against an FICP by an exchange would be assigned to the relevant OBPP or OBPPs. Conversely, grievances received against an OBPP by an FICP would be handled by SEBI.

The exchange may also initiate disciplinary action against an FICP for misconduct, breach of the Code of Conduct or violation of applicable regulatory requirements. It would have power to cancel or withdraw an FICP’s enlistment after following due process.

When Could an FICP Lose Its Enlistment?

The proposal identifies several circumstances in which an exchange may withdraw an FICP’s enlistment. These include situations where continued operation is considered detrimental to investors or the securities market, where the FICP later becomes ineligible, where the FICP voluntarily requests withdrawal, where an OBPP reports an irregularity, or where operational irregularities are identified that warrant dis-enlistment.

Importantly, where an FICP has relationships with multiple OBPPs, cancellation of its association by one OBPP for reasons other than disciplinary grounds would not, by itself, result in dis-enlistment from the exchange.

Will FICPs Get Access to Investor Protection or Settlement Guarantee Funds?

This is a significant distinction in the proposed framework. The exclusion means that the FICP channel is not being proposed as a route carrying the same protection mechanisms that may apply in other market structures. The proposal specifically asks stakeholders whether this exclusion should be retained.

What Documents and Codes Would Need to Be Standardised?

Before the framework commences, recognised stock exchanges, in consultation with the OBPP Association, would prescribe and publish formats for three core documents or standards:

1. Code of Conduct for FICPs — covering minimum conduct requirements, fiduciary responsibilities, compliance requirements and standards of integrity, fairness and ethics.
2. Disclosure/undertaking — the format through which FICPs would confirm compliance with the Code of Conduct.
3. OBPP–FICP agreement — the standard draft agreement to be executed before an OBPP appoints an FICP.

These formats are important because they would convert the broad principles in the consultation paper into standard operating documentation before the proposed framework becomes operational.

FICP Framework at a Glance

How Can Stakeholders Respond to the Consultation?

SEBI’s Proposed Comment Process

1. Read the instructions shown on the public-comment form.
2. Select this consultation paper from the “Consultation Paper” dropdown after entering the required information.
3. Complete all mandatory fields.
4. If your organisation type is not listed in the dropdown, select “Others” and specify the type that best applies. If you do not represent any organisation, select “Others” and enter “Not Applicable” in the relevant text box.
5. Use an email ID and phone number only once for comments on the particular consultation paper.
6. Select proposals one by one and record the level of agreement for each proposal.
7. Where comments are to be submitted, select “Yes” and use the relevant text boxes.
8. Submit the response and proceed to the next proposal.
9. A respondent may skip a proposal where no response is intended.
10. Before final submission, the respondent can review the draft response covering the proposals.
11. Final comments should be submitted only after a response has been recorded for all proposals.

SEBI states that a PDF copy of the response can also be downloaded from the public-comment webpage.

Technical Issues While Submitting Comments

For technical problems with the web-based form, the consultation paper provides contact details for Mr. Rohit Dubey, GM at [email protected] and Mr. Kartan Shivaraj, AGM at [email protected]. The paper specifies the subject line: “Introduction of Fixed Income Channel Partner (FICP) to distribute Fixed Income Products through Online Bond Platform Provider (OBPP)”.

What Are the Twelve Major Consultation Questions?

The framework has been structured around specific consultation questions covering the core architecture of the proposed FICP model. Stakeholders are therefore not being asked merely for general comments; they are being invited to evaluate individual components of the framework.

Although the contents page groups the document into Objective and Background, Proposal, Framework for FICP and Public Comments, the operative framework itself runs through paragraphs 4.1 to 4.12, followed by the detailed public-comment procedure.

Frequently Asked Questions

CorpLawUpdates Analysis

The most important feature of the proposal is its attempt to solve the last-mile distribution problem in fixed income investing. OBPPs have already improved digital access and contributed to a dramatic increase in RFQ activity, but digital availability alone does not necessarily solve the trust, language, documentation and investor-education barriers that remain more visible outside large urban centres. SEBI’s use of the MFD model as a reference point is therefore central to understanding why FICPs have been proposed.

For OBPPs, the proposal could materially increase operational and supervisory responsibility. The platform would not simply appoint distributors and wait for business to flow. It would need a documented due-diligence process, client mapping, periodic reporting, training, complaint monitoring, data-security controls, risk-based inspection and escalation mechanisms. The proposed allocation of responsibility also means that a weak FICP-control framework could become an OBPP compliance issue.

For prospective FICPs, the proposed framework creates a comparatively clear boundary around the business model. The FICP can help explain products, onboard clients, assist with documentation and KYC, and facilitate transactions, but it cannot take custody of the investor’s money or securities and cannot issue transaction documents. The requirement for NISM certification and the emphasis on conduct, mis-selling and conflicts of interest indicate that SEBI is trying to establish a regulated advisory-like distribution discipline without transferring execution and asset-handling functions away from the OBPP.

The proposed 2.5% fee ceiling is likely to be one of the commercially significant points during consultation. The proposal also separates FICP remuneration from direct client collections: the FICP is to be paid by the OBPP, while the client-facing commission, fee or brokerage remains subject to the proposed ceiling. Stakeholders may therefore focus on how the cap should work across different products, transaction sizes and distribution arrangements.

Another important consultation point is the proposed exclusion from Investor Protection Fund and Settlement Guarantee Fund mechanisms. That provision will matter for investor expectations and disclosure because an investor dealing through an FICP may otherwise assume that every part of the distribution chain carries the same protection available in other market structures. The final framework will need clear communication around this distinction if the proposal is adopted.

From a policy perspective, the proposal is best viewed as an attempt to combine technology, local distribution and regulatory oversight. Whether that combination materially increases retail participation will depend not only on the final rules, but also on how exchanges and OBPPs implement the Code of Conduct, distributor training, complaint escalation, data-security standards and product suitability safeguards. For now, the framework remains subject to public consultation.

Source Note