Bharat Bond: A Safe Bet

Bharat Bond

The Union Cabinet on Wednesday cleared a bond exchange-traded fund (ETF) program, called Bharat Bond, the country’s first debt-based ETF, which comes after two such equity-based funds.

Through, the launch of Bharat Bond, the government hopes to diversify investor base and bring in retail investors as well, it aims to deepen the Bond markets at the same time.

Aimed at strengthening the country’s bond market and boosting retail investor participation, the Bharat Bond ETF will constitute bonds issued by the central public sector enterprises (CPSEs) and public financial institutions

These bonds will provide safety, liquidity and predictable tax-efficient returns as well.

The success of equity ETF launch in 2014 and 2017, is the precursor for the launch of Bharat Bond.

Through Bharat Bond ETF, investors will get exposure to government companies, financial institutions.

The funds raised via Bond ETF will be utilized to meet these organizations funding, bank financing needs.

There are 13 public sector companies with AAA ratings participating in the Bharat Bond. Investors looking for steady returns in the range of 5-6% may consider investing in this ETF.

The Bharat Bond ETF will be available to retail investors starting at Rs 1,000, which will attract those not participating in the bond markets due to liquidity and accessibility constraints.

Each ETF will have a fixed maturity date, starting with two maturity series: three years and 10 years. 

It will track an index that will be constructed by the NSE.

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