How To Invest in Bonds in India?

Investing in bonds in India can be done through various channels such as investing directly with the issuer or through the secondary market, where bonds are traded among investors. Here are the steps to invest in bonds in India:

 

Govt Bonds Investment

 

Step 1: Open a Demat Account: A Demat account is a mandatory account for buying and selling bonds in India. This account will hold your bonds in electronic form. You can open a Demat account with any registered depository participant (DP) in India.

 

Step 2: Choose a Bond: Once you have a Demat account, you can start looking for bonds that fit your investment criteria. You can either invest in government bonds, corporate bonds, or municipal bonds. You can find the available bonds on the websites of the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

 

Step 3: Check the Credit Rating: Before investing in a bond, it is essential to check the credit rating of the bond issuer. The credit rating is an independent assessment of the issuer's ability to pay back the bond's principal and interest. The credit rating agencies in India are CRISIL, ICRA, and CARE.

 

Step 4: Place the Order: Once you have chosen the bond and checked its credit rating, you can place an order through your broker or online trading account. You will need to provide the details of the bond, such as the name of the bond, its ISIN number, the quantity you want to buy, and the price you are willing to pay.

 

Example: Suppose you want to invest in a corporate bond issued by Reliance Industries Limited (RIL). The bond has a face value of Rs. 1,000 and a coupon rate of 6% per annum, payable semi-annually. The bond matures in 10 years.

 

Step 5: Make the Payment: Once your order is executed, you will have to make the payment for the bond. You can make the payment through your trading account or by issuing a cheque.

 

Step 6: Receive the Bond: After the payment is made, the bond will be credited to your Demat account. You will receive periodic interest payments on the bond until it matures, and you will receive the principal amount at maturity.

 

In conclusion, investing in bonds in India is a simple process that requires opening a Demat account, choosing a bond, checking its credit rating, placing an order, making the payment, and receiving the bond in your Demat account. It is important to do proper research before investing in a bond and to diversify your portfolio to manage risk.