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A Bond is simply a loan given to the issuer (borrower) by the bondholder (lender) whereby terms of interest payment and the redemption date/s are pre-determined. When you purchase a bond, you are lending money to any entity known as issuer. The legal document registering this loan is called a bond and the issuer pays interest to you on the amount of money you lend and on expiry of the tenure shall pay back the Principal amount. While Bonds are securities that are mostly issued by the government, bonds issued by companies are often called Debentures.

The yield is the effective interest rate on bonds. The yield will vary inversely with the market price of the Bond.
Yield= (Coupon/ Market Price of Bond) X 100
Interest payouts on bonds are fixed; an increase in bond price means you(or buyer) pay more for the same returns, so effective returns are less. Another way is also true: if bond prices decrease, you (or buyer) are paying less for the same returns; hence effective returns are more.Thus bond yield and bond price are inversely related..

Yield to maturity(YTM) is the effective return that an investor gets if he/she holds the Bond until maturity. In the case of callable bonds, Bonds can get called back by the issuer on the call date, so the callable date becomes a proxy for the maturity date. The effective returns calculated until this callable date is called the Yield to Call (YTC). The coupon of a Bond is the fixed interest that a Bond pays annually.

The settlement amount is the amount the buyer has to pay to own bonds. The settlement amount is the sum of the market price of the Bond and accrued interest (that has got accrued since the last Interest Payment Date

Accrued interest is the amount that the bondholder is supposed to get from the bond issuer, but it is yet to be paid. If the present bondholder sells his Bond before maturity, he has to get the interest until the date of the sale. Here can be a time gap between the last interest payout he received until the date he sells it. As the next interest payout goes to the buyer/ new bondholder, the buyer must pay this accrued interest to the seller/ previous bondholder, along with the selling price of the Bond. The settlement amount is the amount the buyer has to pay to own bonds. The settlement amount is the sum of the market price of the Bond and accrued interest.

The coupon is the fixed rate of interest promised by the issuer, whereas yield is effective returns from the bond investment. Yield is dependent on the market price, and the yield varies inversely to the bond's market price.

If the present bondholder sells his Bonds, he has to get the interest until the date of the sale. Here can be a time gap between the last interest payout he received until he sells them. As the next interest payout goes to the buyer, the buyer must pay this accrued interest to the seller, in addition to the Bond's selling price.

The interest payment will hit the bondholder's bank account associated with the Demat account as per the predefined schedule.

Once your order is confirmed, bond units will be credited to your Demat account on T+1 day, i.e., the next trading day.

You can start investing in bonds for as low as Rs. 10,000. However, it could vary depending on your investment choice.

National Securities Clearing Corporation Ltd (NSCCL) andIndian Clearing Corporation Ltd (ICCL) are settlement bodies regulated by SEBI. These are clearing corporations to settle the trade to eliminate counterparty settlement risk. It is advisable to settle all trades via ICCL / NSCCL only.

The Bonds are traded at market prices that can vary from par value(par value is the price of the Bond at which the issuer issues it). If the market price is less than par value, it is called Discounted Price, and if the market price is higher than the par value, it is called Premium Price.

After adding the beneficiary, activation takes a few hours. If you are having any trouble, get in touch with your bank

Generally, It takes 1 to 3 days to increase the TPT limit to 10L. However, it varies from bank to bank.

After the deal settlement, you must be able to see units in your Demat account within 24 hours. After 24 hours, if units are not reflected in your Demat account, please get a holding statement from your Demat Provider.

No. You need to transfer the investment amount to the counterparty settlement authority's (ICCL/ NSCCL) Bank Account held with Reserve Bank of India. The money transfer mode is compulsorily RTGS.

Senior Bonds are the bonds that are considered before other junior bonds in the hierarchy of payment during liquidation. Senior Bonds come with lower risk. Subordinate bonds come with higher returns and relatively higher risk. In the extreme case of liquidation of the Bond Issuing company, "senior bonds" are paid off before "subordinate bonds.Unsecured Bonds don't come with any collateral. If the issuer defaults, unsecured bondholders can't claim any of the issuers' assets. Here investment decision is taken purely on trust on the issuer and credit history of the issuer. During bankruptcy, secured bonds are paid before unsecured bonds.

Once you submit your IPO application, your Bank will send you an SMS requesting approval of the payment via UPI. You can go to the respective UPI app and approve the payment. By approving the payment, you are accepting the mandate.

After you subscribe to an IPO, ASBA blocks the application amount in your bank account. In the case your IPO application gets rejected, the amount will be released within 1 or 2 working days.

There could be various reasons for the rejection of your IPO applications. A few of the probable causes are listed here.
The applicant gives an invalid or incorrect DP ID / Client ID
The PAN given in the IPO application is not matching with the PAN associated with the given Demat account. The given Demat account number is wrong.
As per SEBI, for a given IPO, one person can submit only one application. If one person submits more than one application, then all of his/her applications will get rejected.
The given Demat account is inactive.
If the Demat account is not accessed for a long time, the Demat account becomes Dormant. The maximum duration Demat account can remain unused before it becomes dormant will be mentioned in an agreement made with DP. By paying reactivation fees to your DP, the Demat account can be reactivated.
If the UPI mandate is not accepted within 48 hours of placing the application
The given UPI handle is invalid

Once the securities are allotted in an IPO, investors will be informed via email and SMS. To check allotment status, investors can visit the registrar's website or BSE/NSE website. By providing your application number and PAN, you can check the allotment status.
If you have applied for an IPO via Investment In Bonds, you can check your allotment status on our platform in the IPO order page under Order history.

If bond units are not allotted to you, then corresponding reasons could be
  • Your application got rejected.
  • Securities got fully subscribed on a first-come, first-serve basis.

National Payments Corporation of India (NPCI) has set a transaction limit of 2 lakhs in the UPI-based payments on the instant inter-bank fund transfer mechanism. Hence, you can't invest more than RS. 2 lakhs. However, you can invest more than 2 lakhs in Bond IPOs through the above mentioned offline process

Minor can open a Demat account. Guardian can operate the minor's Demat account and participate in bond IPO. Father is the first guardian; in the absence of the father, the mother becomes the guardian. In the absence of both of the parents, legal guardians can operate the minor's Demat account. Once a minor's Demat account is accessible, the guardian can apply for an IPO like any other participant.

KYC is the requirement set by SEBI to verify the customer details to prevent money laundering. This is a simple yet essential step that is to be undertaken by every investor.

It depends on the availability and proactiveness of the customer in submitting all required and correct documents. Once the customer uploads all required (and accurate) documents, the KYC process takes a maximum of 1 working day. Post this; the investor can start investing in Bonds.

CMR stands forClient Master Report; The Demat provider provides it. It reads the client details like Client ID and DP ID, customer name, address, DOB, bank account, nominations, etc.
You can get your latest CMR softcopy from your registered Broker like Zerodha, HDFC Securities, etc.

If you don't have a CMR, you can use the Demat holding statement as Demat proof. Demat holding statements must not be more than two months old and should show the following details.
  • Status of Demat Account (active or dormant)
  • Demat provider ID(8 digits)
  • Client ID(8 digits)
  • Demat provider logo
  • Pan number of investor

If you don't have a canceled cheque, you can use the bank statement as bank proof. The bank statement should have the following details.
  • Bank logo
  • Account Holder's Name
  • Account number
  • PAN number(optional)
  • IFSC code
  • MICR code

Every case of discrepancy in the name is unique, and we commit to working closely with customers to resolve the same. Customers have to produce a few additional documents to resolve the issue. The extra documents to be uploaded will be informed to the customer by our KYC team.
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About IIB

We provide financial planning, advice and resources that investors need. As the financial industry evolves and customer needs become more complex, we have and continue to reinvent, innovate and transform ourselves to be ready for the financial landscape of tomorrow.

Our team is led by Bhavanand Kumar Mishra who has outstanding expertise in the Bond Market, Forex. He is M.B.A, certified associate of Indian Institute of Bankers, certified treasury professional holder from IIBF, Mumbai. He has worked as Chief Dealer in almost all asset classes especially in the Fixed Income in the treasury, with twenty plus years of expertise including overseas experience at London & Birmingham in U.K. in the Punjab National Bank, which is the second largest PSU Bank in India. Mr. Mishra is supported by a team of young professionals.

Why Do You Need To Invest in Bonds?

The size of Indian Bond market is increasing substantially year on year basis and so the opportunity also multiplies. Indian Bond market consists of Central Government securities (G-Secs), State Development Loans (SDLs), Treasury Bills, these securities are also called as Sovereign assets classes. Particularly State Development Loans is a higher yield asset class and suitable for the retail investors. State Development Loans (SDLs) maintains 25 to 50 bps spread from the G-Secs in the respective maturities however, these spread is not sacrosanct and may vary depends on the multiple variables.

As far as Corporate Bonds are concerned, Public Sector Undertakings like PFC, REC, NABARD, NHAI, etc, Private Companies, NBFC are issuing multiple bonds round the year having different maturities. These corporate bonds carry substantial spread from the G-Sec.

Generally, before investing in Bank/Corporate Fixed Deposit, depositors compares the rate of different bank's offered rate of interest and then decides where to invest in. Generally, investors don't give importance to the fact that their deposits per bank is secured only up to INR 5 Lakh. Further, if the individual left with additional surplus money, he/she chooses to invest in the Debt MFs. In the debt MFs, there are multiple entry or/and exit load and other charges which makes their return less profitable than their direct investment in the bond. At the end of day, Fund Managers of the Debt MFs invest in the bonds only which are available in the market.

Summary - The diversification of the investment portfolio is the key to manage hard earned savings. While we don't negate the importance of Bank's Fixed Deposit, but at the same time we also don't appreciate investing all the money either in the Bank/Corporate FDs or in the MFs. In the modern era, when all the information are widely and easily available, we must change the investing habits a little bit to earn more without putting any extra effort. Interestingly, investing in the bond is quite easier than our believe as everything can be done sitting at the home.

What are the Different Types of Investments?

Bonds are issued by organizations generally for a period of more than one year to raise money by borrowing. Following are the types of bonds:

  • Fixed Rate Bonds
    In Fixed Rate Bonds, the interest remains fixed through out the tenure of the bond. Owing to a constant interest rate, fixed rate bonds are resistant to changes and fluctuations in the market.
  • Floating Rate Bonds
    Floating rate bonds have a fluctuating interest rate (coupons) as per the current market reference rate.
  • Zero Interest Rate Bonds
    Zero Interest Rate Bonds do not pay any regular interest to the investors. In such types of bonds, issuers only pay the principal amount to the bond holders.
  • Inflation Linked Bonds
    Bonds linked to inflation are called inflation linked bonds. The interest rate of Inflation linked bonds is generally lower than fixed rate bonds.
  • Perpetual Bonds
    Bonds with no maturity dates are called perpetual bonds. Holders of perpetual bonds enjoy interest throughout.
  • Subordinated Bonds
    Bonds which are given less priority as compared to other bonds of the company in cases of a close down are called subordinated bonds. In cases of liquidation, subordinated bonds are given less importance as compared to senior bonds which are paid first.
  • Bearer Bonds
    Bearer Bonds do not carry the name of the bond holder and anyone who possesses the bond certificate can claim the amount. If the bond certificate gets stolen or misplaced by the bond holder, anyone else with the paper can claim the bond amount.
  • War Bonds
    War Bonds are issued by any government to raise funds in cases of war.
  • Serial Bonds
    Bonds maturing over a period of time in installments are called serial bonds.
  • Climate Bonds
    Climate Bonds are issued by any government to raise funds when the country concerned faces any adverse changes in climatic conditions.

What are Bonds and Debentures?

In general, Bonds and Debentures are interchangeably used in conversation but they have their own definition and characteristics related to them.

What Are The Different Types Of Bonds and Debentures In India?

Here is the list of popular Bonds and Debentures available in India.

  • Central Government Bonds
  • State Government Bonds
  • Municipal And Local Authority Bonds
  • Corporate Bonds
  • Public Sector Bonds
  • Tax-Free Bonds