The Cabinet on Wednesday cleared the launch of Bharat Bond Exchange Traded Fund (ETF). This will be the first corporate bond ETF in the country which will help in deepening the bond market.
The bonds which will be traded on bourses will be issued by CPSEs, CPSUs/CPFIs/and other govt organisations providing additional liquidity to these organisations.
NS Venkatesh, CEO of Association of Mutual Funds in India (AMFI) said, "It's a historic occasion for retail investors as also for the Indian corporate bond market. Retail investors will now be able to invest in an altogether new liquid avenue in quality public sector bonds, through the very low-cost ETF structure. It would also help the economy as country's first exchange-traded bonds belonging to quality public sector enterprises bundled in a liquid low-cost ETF structure, would help in deepening and widening the participation in the Indian corporate bond market."
The bonds will have a small unit size of Rs 1,000. The ETF will have transparent periodic live NAV during the day and transparent portfolio (daily disclosure on website). It will have a low trading charge of 0.0005%.
Each ETF will have a fixed maturity date and will invest in a portfolio of bonds of CPSE, CPSU, CPFI or other govt organisations. The ETF will have two maturity series: 3 and 10 years.