Now Reading: Bond market opens to retail investors with Rs 10,000 minimum
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Bond market opens to retail investors with Rs 10,000 minimum
The Securities and Exchange Board of India (Sebi) has cut the minimum face value of privately placed debt securities to Rs 10,000, making corporate bonds accessible to retail investors for the first…
The Securities and Exchange Board of India (Sebi) has cut the minimum face value of privately placed debt securities to Rs 10,000, making corporate bonds accessible to retail investors for the first time. Online bond platforms now offer hundreds of issuances at the click of a button, allowing small investors to buy instruments that were previously restricted to high-net-worth individuals with minimum tickets of Rs 1 lakh.
However, experts caution that bonds are not the same as fixed deposits. A bond is a loan to a specific borrower with its own maturity date, coupon rate, credit rating and liquidity profile. The yield offered is the market's price for risk, a significantly higher yield than a government security of the same tenure is compensation for a real risk, not a gift.
The five factors investors must evaluate before buying are: maturity, coupon, credit quality, liquidity and the issuer's financial health. India's corporate bond market has grown to nearly Rs 59 lakh crore, but the secondary market remains thin, meaning investors should plan to hold bonds to maturity rather than rely on early exit.
Indian Opinion Analysis
The corporate bond market has long been dominated by institutional and high-net-worth investors. The Rs 1 lakh minimum that prevailed before Sebi's latest cut still excluded most retail savers. Now that the floor has dropped to Rs 10,000, the next bottleneck is financial literacy. Unlike bank deposits insured up to Rs 5 lakh per account under the DICGC, corporate bonds carry credit risk that can result in total loss if the issuer defaults. Credit ratings from agencies such as CRISIL, ICRA and CARE are opinions, not guarantees, and ratings can be downgraded. The secondary market illiquidity means a bondholder who needs money before maturity may have to sell at a discount or wait. The real shift will happen when retail investors learn to read a bond's offer document as carefully as they read a fixed deposit certificate.
Source: livemint.com
This brief was synthesised by AI from the source linked above.
