How to Buy Bonds in India: A Guide for Retail Investors
Investing wisely is key to financial growth. Many Indians focus on stocks or fixed deposits. However, bonds offer another strong option. They provide steady, predictable income. Bonds typically carry lower risk than stocks. They diversify your investment portfolio. Understanding how to buy them is important. Retail investors now have many avenues. You can choose a method that suits you.
Here are the main ways for retail investors to buy bonds in India:
1. RBI Retail Direct Scheme
The Reserve Bank of India (RBI) launched this scheme. It allows direct bond investment. Retail investors can access government securities (G-Secs). This includes Treasury Bills and Dated G-Secs. It also covers Sovereign Gold Bonds (SGBs). You avoid intermediaries entirely.
How it works:
- Open an RDG Account: You open a “Retail Direct Gilt” (RDG) account. This is free of cost with the RBI. You complete KYC formalities online. Link your savings bank account.
- Place Bids: You can participate in primary auctions. RBI conducts these for new G-Secs. The platform shows upcoming auctions. You place your bid directly. You can also buy/sell in the secondary market. Use the Negotiated Dealing System – Order Matching (NDS-OM) platform.
- Payment & Holding: Make payments via net banking or UPI. The bonds credit to your RDG account. They appear in electronic form. RBI manages all interest payments. They also handle maturity proceeds. These amounts directly credit your linked bank account.
- Pros: It offers direct access to government bonds. You pay no brokerage fees. It provides a highly secure investment. Transparency is very high. Minimum investment is low, starting from Rs 10,000.
- Cons: It focuses only on government securities. You cannot buy corporate bonds here. The secondary market liquidity for some G-Secs might be lower.
2. Through Brokers
Many brokerage firms facilitate bond transactions. They connect buyers with sellers. These firms offer access to various bond types. You can buy both government and corporate bonds.
How it works:
- Open Accounts: You need a demat account. You also need a trading account. Most stockbrokers offer these accounts. Some provide a convenient 3-in-1 account. This combines banking, demat, and trading.
- Place Orders: You log into your broker’s platform. This can be a website or app. You search for available bonds. Brokers often list corporate bonds. They also list some government bonds. You select the bond and place an order.
- Settlement: The broker executes your trade. Bonds credit to your demat account. This usually takes T+1 or T+2 days. All payments go through your linked bank account.
- Pros: You get access to a wide range of bonds. This includes corporate bonds. Many brokers offer research and insights. They simplify the buying process. You trade through a familiar platform.
- Cons: You pay brokerage fees on transactions. These charges vary by broker. Some bonds may have lower liquidity. This makes selling difficult. You must rely on the broker’s platform.
3. On Stock Exchanges (NSE & BSE)
Major stock exchanges list various bonds. The National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are key. They have dedicated debt segments. Here, bonds trade like stocks.
How it works:
- Broker Access: You must have a trading account. This account links with an exchange member broker. You cannot trade directly on exchanges.
- Trading Platform: You use your broker’s trading platform. You find listed bonds there. This includes G-Secs, SDLs, and corporate bonds. Many PSU and tax-free bonds also list here.
- Order Placement: You place buy orders for chosen bonds. The exchange matches your order. Trading happens in real-time. Prices are transparent.
- Demat Account: The bonds credit to your demat account. This occurs after successful settlement.
- Pros: It offers high liquidity for listed bonds. Transparency in pricing is excellent. You can easily buy and sell. It provides a regulated trading environment. You get real-time price updates.
- Cons: You still need a broker account. Brokerage fees apply. Some bonds might have low trading volumes. This can affect quick selling. The minimum investment for some bonds can be higher.
4. Online Bond Platforms / Fintech Platforms
Several specialized online platforms exist now. These fintech companies focus on bonds. They simplify bond investment. They offer curated bond inventories.
How it works:
- Platform Registration: You register on the platform. Complete their KYC process. Link your bank and demat accounts.
- Explore and Select: These platforms offer user-friendly interfaces. They list various bonds. You can filter by rating, yield, and maturity. Many provide detailed bond information.
- Purchase: You select your bond. Place a buy order. The platform facilitates the transaction. They often act as an Online Bond Providing Platform (OBPP).
- Demat Credit: Bonds credit directly to your demat account.
- Pros: They provide easy access to many bond types. User interfaces are often intuitive. You get curated selections. Some offer detailed analysis. They may have lower minimum investment amounts.
- Cons: These platforms are relatively new. You need to verify their credibility. Ensure they are SEBI-registered. Liquidity can vary for specific bonds.
Choosing the right method depends on your needs. Consider the bond type you want. Think about convenience and cost. Evaluate your comfort with technology. Each path offers unique benefits for retail investors.
