The Bharat Bond Exchange Traded Fund (ETF) which the Cabinet has cleared today is the first corporate bond ETF in the country. The ETF will provide an additional source of funding for government organisations.
Here's all you need to know about the Bharat Bond Exchange Traded Fund (ETF).
- Central Public Sector Undertakings (CPSUs) Central Public Sector Enterprises (CPSEs), Central Public Financial Institutions (CPFIs) and other government organisations will issue this ETF. Initially, this basket of bonds will comprise all AAA rated bonds.
- Edelweiss Asset Management will manage the ETF which will be traded on stock exchanges.
- By clearing the launch of Bharat Bond Exchange Traded Fund, the Modi government has allowed retail investors to access this space. The fund will provide access to retail investors to invest in bonds with smaller amount (as low as Rs 1,000), thereby providing easy and low-cost access to bond markets.
- Bharat Bond Exchange Traded Fund will offer two options for maturity: 3 years and 10 years. The ETF will offer only growth option, and no dividend option. It is likely to be launched this month.
- Since bond ETFs adopt a passive investing route by following an index, they involve lower costs when compared to actively managed bond mutual funds. Bharat Bond Exchange Traded Fund will have low trading charge of 0.0005%.
- The bonds involved in the ETF will have a small unit size of Rs 1,000. The ETF will invest in a portfolio of bonds of CPSE, CPSU, CPFI or any other government organisations that matures on or before the maturity date of the ETF
- Investment in this ETF will provide tax efficiency when compared to bonds. Bond ETFs carry benefit of indexation which significantly reduces the tax on capital gains for investors.
By Aseem Thapliyal