Learn · Piece 3
Types of Bonds in India
Different bonds, one shared idea: someone is borrowing, and someone is promising to repay.
The main difference between bond types is simply who is borrowing your money. A means the borrower is the Government of India. A corporate bond means the borrower is a company, and its tells you how reliably it has repaid in the past.
Comparing the Five Types
| Bond Type | Who Is Borrowing | Typical Safety Level | Ease for a Beginner |
|---|---|---|---|
| Central government | Considered very safe | Moderate; usually needs a bit of learning | |
| A state government | Considered fairly safe | Moderate; less commonly known | |
| Corporate Bonds / | A private company | Depends on the company's credit rating | Varies; needs care in choosing the company |
| A government-owned company | Generally considered fairly safe | Moderate; fairly widely available | |
| Central government, value linked to gold | Considered very safe on repayment, but value moves with gold prices | Depends on availability at the time |
G-Secs
- Who Is Borrowing
- Central government
- Typical Safety Level
- Considered very safe
- Ease for a Beginner
- Moderate; usually needs a bit of learning
SDLs
- Who Is Borrowing
- A state government
- Typical Safety Level
- Considered fairly safe
- Ease for a Beginner
- Moderate; less commonly known
Corporate Bonds / NCDs
- Who Is Borrowing
- A private company
- Typical Safety Level
- Depends on the company's credit rating
- Ease for a Beginner
- Varies; needs care in choosing the company
PSU Bonds
- Who Is Borrowing
- A government-owned company
- Typical Safety Level
- Generally considered fairly safe
- Ease for a Beginner
- Moderate; fairly widely available
Sovereign Gold Bonds
- Who Is Borrowing
- Central government, value linked to gold
- Typical Safety Level
- Considered very safe on repayment, but value moves with gold prices
- Ease for a Beginner
- Depends on availability at the time
Availability changes over time
Availability of new sovereign gold bonds can change over time. It is worth checking current status before assuming they are available.
Every bond, no matter the borrower, involves lending money and trusting a promise to repay it. Understanding who is borrowing, and how that borrower's finances work, is the first step to understanding any bond.
This article is for general education only. It does not tell you what to buy. Every person's money situation is different — please think about your own needs, or talk to a licensed adviser, before investing.
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