In India, investors can invest their hard-earned money in a variety of financial instruments, including bonds. A bond is a debt instrument in which the issuer corporation borrows funds from the bondholder and, in exchange, is obligated to pay interest which is known as a Coupon. The bondholder enters into a legal contract with the issuer, who agrees to return borrowed funds with interest at specified intervals, such as semi-annually, annually, or monthly.

In contrast to bondholders, stockholders have an ownership stake in the company, whereas bondholders have a creditor stake. In India, both the government and business owners use these instruments to raise capital for long-term investments or current expenses. Bonds are thought to be a safe investment option in India because they carry less risk than other types of investments.

Let's look into the types of bonds available in India and how to invest in them:

Types Of Bonds

1. Corporate Bonds

Corporate bonds are debt instruments that companies use to borrow money from investors for a set amount of time at a set interest rate. Bonds are usually sold to investors so that the company can grow in the future by getting more money or starting a new project.

For these reasons, the company asks investors to put their money into the company in exchange for a certain rate of return for a certain amount of time instead of getting a loan from the bank. When the time period is over, investors get the face value plus the interest rate. Investors who want a fixed interest rate for the length of their investment usually choose this type of bond.

2. Government Securities Bonds

The central or state government of India issues debt instruments called Government securities bonds. In India, Government bonds are considered Government securities (G-Sec), which are mostly long-term investments with terms between 5 and 40 years.

State Development Loans are another name for bonds that the state government gives out. The Indian government made these government securities so that small investors can put in small amounts and earn interest with less risk. Interest on these types of bonds is paid out every six months and can be fixed or variable. But most government bonds come with a fixed rate of interest.

3. RBI Bonds

The Floating Rate Savings Bonds 2020 (Taxable), which are also known as the RBI 7.15% Bonds, offer a taxable interest rate of 7.15 percent over a seven-year period. They have taken the place of the Government of India's 7.75% (taxable) bonds, which people sometimes refer to as RBI 7.75% bonds. The interest rate on these bonds changes every six months (which started on January 1, 2021) This is why they are called "floating-rate bonds."

4. Convertible Bonds

These offer both debt and equity characteristics, but not simultaneously. This can be converted into a fixed number of shares, allowing bondholders to become shareholders of the company and receive all shareholder privileges. After purchasing convertible bonds, investors are able to profit from both debt and equity products.

5. Inflation-Linked Bonds

This particular category of bonds offers protection against inflation and is designed specifically to eliminate the inflation risk associated with investments that are predominantly issued by the government. When it comes to inflation-linked bonds, both the principal and the interest rates fluctuate up and down depending on how fast inflation is moving.

6. Sovereign Gold Bonds

This sort of government bond is issued by the central government for investors who wish to invest in gold but do not wish to hold gold in physical form. This bond's interest income is exempt from taxation. It is also regarded as a highly secured bond because the government issues it. If an investor wants to get their money back, they can do so after five years. This will only change the date of the next interest payment.

7. Zero-Coupon Bonds

This financial instrument pays no interest. It is also known as a pure discount bond because the money invested does not provide a regular interest rate until the bond matures. Annual returns on principle include the face value, which is given to the holder when the bond matures.

How To Invest In Bonds

You have the option of investing in these financial products on either the primary or the secondary market. One can subscribe to the public issues of significant firms through the primary market. This financial instrument can also be purchased via secondary markets that are traded on exchanges as an alternative. When it comes to liquidity, bonds are typically held until they reach their maturity date.

For more information on how to invest in bonds securely, you can always contact Bondskart, and our experts will guide you on how to invest through India's first Intuitive Bonds Investment Platform.