A government bond is a long-term debt instrument that falls under the broad category of government securities (G-Secs). Both the Central and the State Governments of India can issue bonds. When the Government goes through a fund crisis to finance a particular infrastructure project, it issues bonds. The Reserve Bank of India (RBI) issues the government bonds on behalf of the Government. Bonds can be used as collateral for loans.
A Government bond can simply be defined as a contract between the issuer (the Government) and the investor, wherein the Government offers guaranteed interest on the face value of bonds. The interest rates on bonds, called the coupon rate, can either be fixed or floating credited to the investor on a semi-annual basis. Most of the time, Government bonds are issued at a fixed coupon rate. The Government repays the principal amount on the maturity date that can be after 5-40 years in the case of G-Secs.
Initially, only large investors,i.e., corporations and commercial banks, were allowed to invest in G-Secs. Later, the Government opened the entry for the smaller investors like retail investors, co-operative banks also.
Bonds are tradable on stock exchanges. Investors can find multiple variants of Government bonds and invest to accomplish their long-term financial objectives.
Factors to consider while investing in Bonds
- Risk – A risk-taker can always opt for bonds that give higher returns, like call/put bonds, whereas a conservative investor would do better with G-Sec Bonds.
- Tenure – One needs to assess the period that one invests for. A person who needs money fast should rely on Treasury bills and the like wherein the period is short.
- Saving- Bonds are a great way to save money, depending on your need. For a higher interest, one can always invest in Floating Rate Bonds, and for a conservative investment, G-Sec Bonds are available.
- Tax saving – Returns from Bonds are exempted from tax on interest as mentioned under Section 10 of The Income Tax Act of India, 1961.
- Rate of return – Again, we have to determine whether we need a higher rate of return with higher risk using Floating Rate Bonds or lesser risk with lesser return with G-Sec Bonds.
- Age – Age is an important factor to consider. The average person needs to decide whether his earning capacity will allow him to invest for longer or shorter periods.
- Credibility – The credibility of a bond is decided by the rating it gets from credit agencies like Moody’s, Standard & Poor’s, Fitch, etc. The highest rating is AAA, and the lowest rating is D. RURASH helps its clients to invest in AAA-rated Bonds.
Investors can rely on RURASH Financials to make an informed investment decision. We also cater to the Ultra HNI and NRI segments. In conclusion, bonds bring safety to your portfolio, and RURASH Financials makes it easier for you.
Why invest in Bonds
Bonds carry lesser risk in comparison to stocks and shares. They are relatively more stable as they are legally binding. They present wider options since there are many varieties available. With bonds like CIB and inflation Indexed Bonds, one can expect protection from the volatility of markets.
Since bonds present an array of investment options, it does look like an attractive opportunity. One hindrance is the lack of knowledge in people about the various investment options and the limited reach to all income groups. We can rely on Rurash Financials for helping us make an informed decision. Highly rated bonds like Asirvad Microfinance Limited which provides a return of 10.08%, The South Indian Bank Limited giving a return of 13.29% and other highly rated bonds are available through Rurash Financials’ online platform.