India: A Capital Markets: Debt Overview
India’s debt capital markets enter 2026 with focused systemic changes that make issuance, investment and execution more efficient. There are significant departures from historic policy positions proposed to the existing regulatory framework for debt securities which will reshape Indian borrowing and lending landscapes and result in a shift in India’s lending outlook. Trends that began in 2025 are now shaping behaviour across the debt capital market landscape.
Key Reformative Changes Expected in 2026
Considerable policy pivots continue to influence debt markets, mainly in the space of acquisition finance. One of the key proposals includes the overhaul of the external commercial borrowings regime in India, which is expected to expressly permit acquisition end-use, widen the toolkit for Indian corporates and anchor more capital within India’s legal and supervisory perimeter. The other significant shift that can be foreseen is Reserve Bank of India’s announcement of a framework to let Indian banks finance acquisitions by Indian corporates, wherein each bank will set its own policies and limits, and the said board-approved policies formulated by the banks will identify the appetite of the lenders, the nature of collateral needed and the monitoring mechanism. This proposal will result in the borrowers with strong governance and steady cash flows becoming a lucrative set of borrowers. Together, these moves reduce the structural bias towards offshore hubs and allow borrowers to mix rupee and foreign-currency debt in line with their business needs.
Treasury Centralisation and Localising Global Practice at GIFT IFSC
Over the past 12 months, Gujarat International Finance Tec-City International Financial Services Centre (GIFT IFSC) has shown a steep growth curve and the potential to become a top destination for exploring various financing opportunities. GIFT IFSC has moved up nine places in the Global Financial Centres Index, reaching a rank of 43 out of 120 financial centres.
The GIFT IFSC has matured into a practical anchor for cross-border liquidity and corporate treasury centralisation. Global corporate treasury centres can raise at scale from international lenders and on-lend within the group, using a clear and permissive framework that enables access to global credit while remaining within India’s ecosystem. Treasury centres in GIFT IFSC can tap foreign currency loans by issuance of International Financial Services Centre listed bonds and operate multi currency cash pools with competitive pricing. Over time, this deeper offshore liquidity and benchmarking to global curves will lower all in borrowing costs for Indian groups, with swaps and hedges translating those gains into reduced effective rupee coupon rates. The tax regime for such centres improves after-tax outcomes and pricing headroom, which lenders notice. This, in turn, enables repeat issuance, standardised documentation and faster execution.
Hurdles in the Indian Debt Landscape and Relevant Regulatory Proposals
There still exist certain constraints in the Indian debt capital market which limit its potential to serve as a reliable source of financing for Indian corporations. Exorbitant entry costs, information gaps, and the underdeveloped secondary market are some of the key obstacles that have been identified as major factors becoming a roadblock to the success of the corporate bond market in India. Having said that, regulators have taken considerable steps to ease the procedural and compliance norms, with the aim of attracting borrowers and eventually having exponential growth in the issuance of listed bond instruments in India. This can be evidenced from the fact that there has been an increase in listed debt securities issuances in 2025, where companies have raised approximately INR8.66 trillion in listed debt whereas in the whole of 2024, this number stood at INR9.3 trillion.
The Securities and Exchange Board of India (SEBI), India’s securities market regulator, has proposed a suite of pragmatic amendments to the listing framework aimed at reducing the burden on issuers of debt instruments, thereby supporting ease of doing business and helping unlock deeper pools of capital.
A notable amendment has been made to the anchor investor subscription threshold, which is now expressly linked to the credit rating of the debentures and operates inversely to that rating. This structure helps secure dependable book-building by ensuring that a minimum portion is taken up even when the instrument is not highly rated which results in supporting funding certainty. SEBI continues to encourage public issuances of debt securities, and while recognising the need to deepen retail participation in corporate bond markets, SEBI has considered and approved a proposal for amending the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, to permit debt issuers to offer incentives to certain categories of retail investors. Previously, issuers were prohibited from offering any such incentives. Further, in a move aimed at reducing compliance burden and facilitating ease of doing business, SEBI has approved a significant relaxation of the criteria for identifying High Value Debt Listed Entities (HVDLEs). The threshold for classification as an HVDLE has been increased from INR10 billion to INR50 billion of outstanding non-convertible debt. This amendment will exempt a substantial number of debt issuers from the enhanced disclosure and governance requirements applicable to HVDLEs. Taken together, these developments signal SEBI’s focus on rationalising regulatory requirements for debt issuers whilst simultaneously broadening investor access to the debt capital market.
SEBI has also expanded the green financing toolkit by formally bringing sustainability-linked bonds (SLBs) within scope and by introducing robust and continuous monitoring obligations. The issuers and lenders have leveraged this framework by linking the coupon of the listed SLBs to achievement of pre-defined sustainability-linked targets wherein the coupon steps down or up depending on whether pre-defined sustainability-linked targets are met, thereby directly translating non-financial performance into tangible pricing benefits. In practice, this creates a result-based incentive dynamic that can widen the investor base to ESG-focused mandates.
What to Expect in 2026
Building on successive waves of reform, ongoing market deepening and an improving credit outlook, 2026 is likely to see India’s debt capital markets broaden across participation, instruments and maturities. This should be accompanied by continued diversification of the investor base and greater depth in secondary market liquidity. Recent regulatory amendments, together with continued review and fine-tuning, are expected to translate into smoother issuance pathways, stronger lender confidence and improved market infrastructure. Coupled with higher-quality credits and more efficient price discovery, these developments should support further expansion in infrastructure and sustainable finance issuance. Increased securitisation activity is also likely as conglomerates optimise balance sheets and investors seek differentiated risk–return profiles. That said, credit selection will remain paramount as growth moderates unevenly across sectors, but disciplined risk management and transparent governance are poised to reinforce confidence. Overall, 2026 should mark a year of practical consolidation and measured innovation, positioning India’s debt markets to channel long term capital onshore and move deal-making to Indian soil.