(Mint) - Players in the bond market feel that the appetite is ripe for direct retail investment in bonds.
For Indians, particularly retired ones who are used to fixed deposits, the idea of hefty interest income is seductive. A series of players in the private sector have sought to tap this demand by launching ‘bond platforms’ where retail investors can directly buy bonds. The RBI Retail Direct platform also addresses this need.
Most Indians are not familiar with the concept of directly buying a bond. Fixed deposits are the most common fixed income instruments, followed by debt mutual funds. Some investors are familiar with tax-free bonds from PSUs, but fresh tax-free bonds have not been issued in several years by the government.
The capital gains tax saving bonds under Section 54 EC of the Income Tax Act, 1961, are another familiar instrument. But these are also available for a specific purpose—to save capital gains tax for someone who has incurred a capital gain, for instance by selling property.
Past instances of aggressive sales of direct bonds to investors have left a bad taste in the mouth for some, such as the buyers of DHFL bonds or the perpetual bonds of Yes Bank. Both issuers defaulted and a resolution scheme for the latter wiped out the claims of bond holders.
By Neil Borate
26 Nov 2021
