Capital markets regulator Sebi on Friday restricted online bond platform providers from offering products other than listed debt securities on their platforms.

In addition, the regulator allowed them to offer securities such as Government Securities, Treasury Bills, listed Sovereign Gold Bonds, listed municipal debt securities, and listed securitised debt instruments on their online bond platforms, according to a circular.

Under the rules, Online Bond Platform Providers (OBPPs) need to register themselves as stock brokers in the debt segment of the stock exchange.

OBPs offer an avenue for investors, particularly non-institutional investors to access the bond market. While restricting products offered on an online bond platform, Sebi reiterated that an entity acting as an online bond platform provider would cease to offer on its platform or any other platform website, products or services not permitted under the rules.

It, further, said that the holding company, subsidiary, or associate of an online bond platform provider will not utilise the name, brand name, or any name resembling that of the online bond platform provider for offering products and services that are not regulated by a financial sector regulator.

This comes after Sebi noted that a few OBPPs have commenced operations and observed that certain OBPPs continue to offer products other than listed debt securities and debt securities proposed to be listed through a public offering on their platforms.

Also, they are offering unlisted bonds on a separate platform or website and have not divested such offerings. Moreover, certain OBP providers have given a link on the online bond platform to another platform for transacting in unlisted bonds and other products, Sebi noted.

Such practices are in contravention of NCS (Issue and Listing of Non-Convertible Securities) Regulations.

The new framework would come into force with immediate effect, the Securities and Exchange Board of India (Sebi) said. In February, Sebi extended the timeline by three weeks beginning February 9 for entities, operating as online bond platform providers, to make an application for registration as stock brokers. During the past few years, there has been an increase in the number of OBPPs offering debt securities to non-institutional investors. Most of them are fintech companies or are backed by stock brokers. There has been a significant increase in the number of registered users who have transacted through such OBPs.

While OBPs give a platform for investors to access the bond market, their operations were outside Sebi's regulatory purview, and accordingly, the regulator notified the framework for entities operating or desirous of operating as OBPPs in November 2022.

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