Bharat Bond Exchange Traded Fund (ETF), the country's first corporate Bond ETF, will open for subscription from December 12-20. It is an exchange-traded mutual fund that will invest in bonds issued by public sector companies.
The Bharat Bond ETF will have a base size of Rs 7,000 crore, with a green shoe option of additional Rs 8,000 crore. The unit value of the Bharat Bond will be capped at Rs 1,000, which will allow retail investors easy and low-cost access to bond markets. This will also increase participation of retail investors who are currently not participating in bond markets due to liquidity and accessibility constraints. Retail investors can invest with the minimum investment amount of Rs 1,000 and in multiples of Rs 1,000 thereafter, subject to maximum investment amount of Rs 2 lakhs only.
Bond ETF will provide safety, liquidity and predictable tax efficient returns. Initially, it will have 2 maturity series - 3 and 10 years- NIFTY Bharat Bond Index - April 2023 and NIFTY Bharat Bond Index - April 2030.
On December 4, the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, had given its approval for creation and launch of Bharat Bond ETF to create an additional source of funding for Central Public Sector Undertakings (CPSUs) Central Public Sector Enterprises (CPSEs), Central Public Financial Institutions (CPFIs) and other Government organisations.
Features of Bharat Bond ETF:
- ETF will invest only in AAA-rated bonds issued by public sector companies.
- It will be listed on stock exchanges.
- Small unit size will be Rs 1,000.
- Each ETF will have a fixed maturity date. As of now, it will have 2 maturity series - 3 and 10 years. Each series will have a separate index of the same maturity series.
- The ETF will track the underlying Index on risk replication basis, i.e. matching Credit Quality and Average Maturity of the Index.
- It will invest in a portfolio of bonds of PSUs that matures on or before the maturity date of the ETF.
Edited by Chitranjan Kumar