India Retail Bonds: Small Savers Buy What Banks Reject — SkimNews
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- Indian retail bond platforms list 208 bonds with only 3% AAA-rated and nearly 66% A+ or below, even as banks, mutual funds and insurers keep their own books in AAA and AA — the inversion at the heart of the piece.
- 68% of BBB bonds on these platforms can be bought for ₹10,000 or less, versus 17% of AAA bonds — the weaker the issuer, the smaller the cheque it accepts from retail.
- Pass-through certificates (PTCs) backed by pools of 10,000+ small loans (kirana stores, truck owners, workshops) carry ₹110–₹125 of loans and cash per ₹100 invested, sit in a trust separate from the lender, and have seen very rare losses in the top slice across 33 years of Crisil ratings.
- Since 2018, IL&FS, DHFL, Altico, Reliance Capital and Srei have all defaulted on debentures; DHFL's small depositors and debenture holders recovered about 23 paise on the rupee nearly two years later.
- The RBI and Sebi set a ₹1 crore minimum on PTC investments, and only about ₹170 crore from 1,900 investors has reached retail that way — against ₹26,000 crore of ordinary bonds sold on the same platforms last year.
- On 27 July, the RBI proposed applying the ₹1 crore floor to every PTC resale from 1 October, arguing complexity; the author's counter-proposal would allow ₹10,000 entry into pools that are A-rated, listed, top-slice-only, built from RBI-regulated lenders, with monthly reporting.
Why it matters: A retail bond market barely three years old could empty out after a cluster of defaults — households sat out equities for decades after individual-stock burns, returning only through diversified mutual funds. The RBI's proposed ₹1 crore floor on PTC resales from October removes the safer, diversified path for small savers while leaving the riskier BBB debenture channel — where 68% of issues already accept ₹10,000 — entirely unregulated for retail entry.
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