Where to Buy Zero-Coupon Bonds in India?

Where to Buy Zero-Coupon Bonds in India?

Where to buy zero coupon bonds

Introduction In FY22, public sector banks will get approx Rs. 15,000 crores capital infusion through zero-coupon bonds. In the last fiscal year, the amount was Rs. 20,000 crores.

Public sector banks require capital infusion to meet their capital adequacy norms. The government being the major stakeholder, provides them with the capital required.

Previously, the government issued bonds that would incur substantial interest costs.

However, now the government has decided to issue zero-coupon bonds to save interest costs.

What is a zero-coupon bond As the name suggests, Zero-coupon bonds are a type of bond that do not make any periodic interest payments (coupons) during the bond’s life.

Instead, the investor buys the bond at a deep discount to its face value and then receives the face value of the bond when it matures, reflecting the fact that the investor is giving up all those periodic payments in return for the lump sum at maturity.

These bonds can be issued by the government and private & public companies.

Know also- what are zero coupon bonds, government bonds, corporate bonds, tax free bonds, g-sec strips.

How to invest in zero-coupon bonds in India?

Individuals can buy zero-coupon bonds in India through these platforms: 1. Broker Through the trading members of NSE and BSE, individuals can buy a zerocoupon bond. Indian companies (public or private) and government-issued bonds can be purchased through the members.

Individuals have to open a Trading and Demat account to participate in zerocoupon bonds.

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How to invest in zero coupon bonds in India

2. Online Platforms If individuals want to buy zero-coupon bonds online, they can opt for online platforms.

There are various choices available to an individual in the case of online platforms.

BondsIndia is one of the most trusted online bonds platforms that provide easy access to various bonds, extensive research and a seamless process.

To get more information about zero-coupon bonds, click here.

3. NSE and BSE Apps Individuals can participate in government-issued zero-coupon bonds through NSE or BSE, mobile apps or a web-based app.

“NSE goBID” is the app of NSE, and the “BSE Direct” is the app of BSE. To take part in non-competitive bidding (NCB), retail investors have to select a facilitator or an aggregator. They can place their bid using the NSE or BSE mobile app/web platform.

Read also- Top 5 safe investments with stable returns in India and Is now a good time to buy bonds online 4. RBI Retail Direct Scheme Individuals can also participate in government-issued zero-coupon bonds through the recently launched scheme by the RBI — RBI Retail Direct Scheme. For that, individuals will have to open a gilt account with the national banks.

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Benefits of investing in zero-coupon bonds Some of the benefits of investing in zero-coupon bonds are: • Zero-coupon bonds are exactly what they sound like — bonds that don’t pay any interest until the bond matures. However, because the investor is buying the bond at a discount, the payment received at maturity is higher than if the investor had purchased a regular coupon bond.

• Another benefit of zero-coupon bonds is that they are less risky than other types of investments as there are no reinvestment risks. This is because no interest is received on these bonds, so the question of reinvesting does not come.

Check- What are the risks involved with bond investment? Does that mean we should not invest in bonds?

Conclusion Zero-coupon bonds offer investors a higher yield than other bonds. This can be a good investment for some, but there are risks involved that investors are advised to consider before investing in these bonds.

One of the most significant risks with zero-coupon bonds is interest rate risk.

This is the risk that interest rates will move up and down, causing the value of the bond to fluctuate. If interest rates rise, the value of the bond will decrease, and vice versa.

Second, because there is no regular income stream from zero-coupon bonds, they can be difficult to sell before maturity. Selling before maturity could mean selling it at a discount to its face value. This can reduce the overall return on investment.

Thus, it is recommended that investors look into all the factors before investing.

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