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Bharat Bond ETF

Topics Covered:

Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Bharat Bond ETF

What to study?

For Prelims: What is Bharat Bond ETF?

For Mains: Features and significance.

 

Context: The government has approved the launch of Bharat Bond ETF, India’s first corporate bond exchange traded fund, comprising debt of state-run companies.

 

Significance:

  • This move will allow retail investors to buy government debt.
  • It will provide retail investors easy and low-cost access to bond markets, with smaller amount as low as ₹1,000.
  • They will provide tax efficiency as compared to bonds, as coupons (interest) from the bonds are taxed depending on the investor’s tax slab.

 

Key features of Bharat Bond ETF:

  1. It is a basket of bonds issued by central public sector enterprises/undertakings or any other government organization bonds. 
  2. It will have a fixed maturity of three and ten years and will trade on the stock exchanges.
  3. It will invest in a portfolio of bonds of state-run companies and other government entities.
  4. It will track an underlying index on risk replication basis, matching credit quality and average maturity of the index.
  5. The index will be constructed by an independent index provider, National Stock Exchange.

Sources: pib.