Skip to content

Which Are the Best Bonds to Invest in India?

“Never depend on a single income. Make investment to create a second source.” – Warren Buffet. 
To meet our ever-growing financial needs, we must consider making money through a second source. There are many investment options where an investor can invest his hard-earned money. Bond is one of them.
Bonds are a type of debt instrument issued by governments and corporates to raise money for their current expenditure needs and finance their long-term investments.
In return, the issuer will provide a fixed rate of return (coupon) as well as the money you initially loaned them (principal).
Due to this, bonds are considered safe as compared to other instruments.
Within bonds, there are many options available. Let us get an introduction to the best bonds for investment in India.

Types of Bonds

Various bonds are available in India issued by different issuers basis on their coupon rate (%), security profile, and maturity profile with different ta options.
So, here is the explanation of the different types of Bonds available for Investments.

a. Government Bonds (GOI)

The Central and State Governments of India require funds for their expenditures, so they issue bonds which are called Government bonds.
Government bonds come with a long maturity, usually 5 to 40 years, and they fall under the category of Government securities (G-Sec). In India, these bonds are issued by the Reserve Bank of India (RBI) and carry a sovereign rating which is the highest. Due to this, they are the safest bonds. 
However, they carry an inflation rate risk, i.e., the returns earned by you from the bond might not beat inflation in the future. 
Investors can invest in Government Bonds through RBI’s Retail Direct or through their debt brokers.
Different types of GOI securities
Central Government BondsCoupon RateIssue DateMaturity Date
8.35% GOI BOND 20228.35%14-05-200214-05-2022
  6.35% GOI SP OIL BOND6.35%23-12-200823-12-2024
7.69% GOI 17 JUN 20437.69%30-04-201917-06-2043

b. Corporate Bonds

A corporate bond is a debt issued by a company for it to raise capital. An investor who buys a corporate bond is effectively lending money to the company in return for a series of interest payments, but these bonds may also actively trade on the secondary market.
These bonds have a different maturity profile ranging from 1 year- 20 Years and are generally medium to long-term debt instruments. 
In India, corporate bonds constitute a large portion of the bond market. Companies issue debt as through this, they can raise money at a lower cost and without any dilution of their share capital.
However, corporate bonds carry a higher default risk than government bonds; therefore, they provide a higher return.
Some of the borrowers and issuers of bonds are NHAI, REC, PFC, NTPC, NHPC, HDFC Limited, Reliance Industries, Muthoot Capital, L&T finance, ICICI bank, etc.
corporate bond can be either an investment grade or non-investment grade bond, depending on its credit rating.  
AAA, AA, A, and BBB are investment-grade bonds, and BB to D are non-investment-grade bonds (also known as high-yield bonds or junk bonds).
Some of the Best traded Corporate Bonds are:
Corporate BondsCoupon RateIssue DateMaturity Date
7.25% ICICI HOME FIN 12 AUG 20317.25%12-08-202112-08-2031
5.25% ONGC 11 APR 20255.25%31-07-202011-04-2025
6.40% ONGC 11 APR 20316.40%11-08-202011-04-2031

c. Tax-Free Bonds

As the name suggests, tax-free bonds are free from taxation. So, the interest earned by the investors on these instruments will be fully exempted from tax as per the Income Tax Act. 
The Government issues these bonds for a specific objective, such as infrastructure and housing projects. An example of this bond is Infrastructure Bonds. 
Tax-free bonds are considered to have very low default risk and have a maturity of 10-20 years.
Some of the Best Tax-Free Bonds are: –
Tax-free bondsCoupon RateIssue DateMaturity Date
7.21% IIFCL 21 NOV 20227.21%21-11-201221-11-2022
7.27% PFC 17 OCT 20307.27%17-10-201517-10-2030
7.62% NTPC 05 OCT 20357.62%05-10-201505-10-2035

d. Zero-Coupon Bonds 

Zero-coupon bonds are those bonds that do not provide any regular interest payment to the investor and are paid along with the principal amount at the time of Principal amount. 
Zero-coupon bonds (Deep Discount Bonds) are redeemed at par but are issued at a discount to their fair value. 
So, the difference between the price at which the bond is issued & the price at which it is redeemed (par value) is the investor’s profit or interest.
For example, if the par value of the bond is Rs. 1000 and the issue price is Rs. 800, then the difference of Rs. 200 will be the profit of the investor.
Some of the Best zero-coupon are: –
Zero-Coupon BondsCoupon RateIssue DateMaturity Date
0.00% KMIL 27 APR 20230.00%27-04-202127-04-2023
0.00% KMPL 28 MAR 20230.00%17-10-201928-03-2023
0.00% FIVE STAR 30 APR 20230.00%29-01-202130-04-2023

Who can Invest in Bonds Online?

An Indian Citizen or an NRI can invest in bonds in India.
It is always advised that an investor diversifies his portfolio to minimize his risk. Therefore, every investor should buy bonds in their portfolio. Bonds are not just for retired individuals or individuals who are not willing to take a risk. It can be bought by everyone depending on their goals and risk profile. 
An investor can invest in bonds in the primary market (subscribing to the public issue) or secondary market (from exchanges where they are traded). 
The minimum amount required to buy bonds varies from platform to platform. 
With BondsIndia, you can start investing with just Rs. 1000. To open your account now, click here.

What to know before Buying Bonds in India?

When you are investing in bonds, whether it is a government bond, corporate bond, tax-free bond, or zero-coupon rate bond, you need to understand some points. Let us see them:
  • It would be best to analyze the risk involved in the bond and what return it can provide. These factors should be examined after taking into account your risk profile. 
  • Before giving a loan, i.e., buying a bond, you should carefully evaluate the issuer. You should check whether he will be able to repay your principal and interest amount. To do this, review the financial statements of the issuer.
  • You should invest in a bond only after considering the investment horizon up to which you expect to hold the investment. 


“Don’t put all your eggs in one basket”. You all might have heard this proverb.
This proverb should be the basis for creating your portfolio. 
An investor should not invest all his money in a single asset, he should diversify his portfolio. A well-balanced portfolio could help him minimize his risk. 
One of the good characteristics of a bond is that it is good for diversification. Stocks and bonds have a negative correlation. Therefore, having bonds in your portfolio can minimize your loss in case of an economic downturn.
It is generally seen that when the stock market comes into a bear market, the demand for bonds starts increasing. Bonds will also provide you with a fixed income during an economic downturn, which will further help you meet your goals. 
If you have any queries related to bonds, which type of bonds to invest in, how to start investing in bonds, the right platform to invest in, regulations relating to bonds, etc. you can contact BondsIndia. 
BONDSINDIA brings up-to-date information when IPOs go live, fixed deposits with higher interests, and bonds with a competitive price before anyone else.
BONDSINDIA ditches the traditional ways of investing by offering a blockchain-based platform for investors that ensures instant online settlements and reduces counterparty risks. Choose BONDSINDIA for its sleek interface, fail-safe communication, and a step-by-step guide to ensure a well-placed bid. For any guidance regarding bonds, fixed deposits, and IPO, please reach out to us at or call us at +91-8882-200-300.