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What’s in it for you: 10 things to know about bond ETFs

​The Bharat Bond ETF aims to provide funds to CPSEs and other government organizations.

Updated: Dec 04, 2019, 04.52 PM IST
Bharat Bond Exchange Traded Fund: Govt clears India's first debt ETF
Bharat Bond Exchange Traded Fund: Govt clears India's first debt ETF
The government on Wednesday approved the launch of India’s first corporate bond ETF (exchange traded fund), which will allow retail investors to participate in India’s bond market.

The Bharat Bond ETF aims to provide funds to central public sector undertakings and other government organisation through bond issues. They will have two maturity periods of three and ten years. The ETF will track an underlying index on risk-replication basis.

“It will be the first corporate bond ETF, which will provide additional money for PSUs as well as other government organisations,” Finance Minister Nirmala Sitharaman said on Wednesday announcing the product.

The government had earlier come up with equity ETFs twice; the first one in 2014 and the second in 2017. “Both the ETFs have had a good success rate,” Sitharaman said.

Here are 10 things you need to know about the new product:

  • 1

    Edelweiss AMC, which will manage Bharat Bond ETF, will roll out 2 tranches a year

  • 2

    You can invest in these ETFs with a minimum of Rs 1,000

  • 3

    These funds will offer only growth option, and no dividend option

  • 4

    ETF to let you participate in India’s economic growth with lesser risk

  • 5

    The ETF will be listed on stock exchanges to allow ready liquidity

  • 6

    These ETFs will hold high quality AAA- and AA-rated securities of PSUs to ensure investor safety

  • 7

    Going by benchmark performance, these ETFs are projected to deliver 50-140 basis points more return that 10-year govt bonds

  • 8

    You can invest for short term, 3 years, or long term, 10 years

  • 9

    Bond ETFs will have defined maturity, meaning they will mature at a fixed term

  • 10

    You can invest in bond ETF for assured returns, which will be better than bank FDs

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