Even with today’s low interest rates, bond investors have something to cheer about. With the recent emergence of several fixed income platforms such as Bondskart, BondsIndia and Axis Direct YIELD, investing in a variety of corporate bonds has become easier for individual investors. However, the minimum investment requirement of ₹ 2 lakh on some of these platforms puts it out of the reach of many small investors.
Bondskart was launched in November 2021 by JM Financial Products, and is the newest of these platforms. BondsIndia, which launched two months ago, is backed by Launchpad Fintech, a SEBI-registered wholesale debt market broker. Both platforms are subject to RBI and SEBI regulations. They hold a stock of bonds from several issuers that are made available for sale to investors.
In addition to these platforms, you can also invest in bonds through a trading account with your broker. However, the range of bonds available and the information provided about them may be limited.
What is shown
All fixed income platforms offer a wide range of corporate bonds issued by public and private sector entities, with diversified maturity and a diversified credit rating profile. Bonds are rated based on several criteria such as credit ratings, short or long-term, tax-exempt or taxable and issuer type, for ease of selection.
For each bond, you can see the current market price, coupon rate, yield to maturity (your return, if the bond is held to maturity), maturity date and projected cash flows during the term of the bond. These platforms provide, to varying degrees, information on the bond issuer.
When buying/selling bonds on these platforms, the transaction is reflected in your demat account (with any broker) that was linked to the platform. However, to make a transaction on Axis Direct YIELD, you need an Axis Direct account.
Start the process
In the case of Axis Direct YIELD, once you complete the process of opening an Axis Direct account (or already have one), you can access it automatically. Bondskart and BondsIndia require you to complete a KYC (Know Your Customer) to start trading on the platforms.
However, if you want to get started, you just want to browse the links available on the two platforms, you just need to do a quick registration without any KYC.
KYC entails providing standard information such as PAN, Aadhaar, demat and bank account details. BondsIndia asks you to fill in the details and Bondskart asks you to send scanned copies of these documents with your photo to start the Know Your Customer (KYC) process. The whole process is carried out online and does not require the physical submission of documents.
Once you complete the formalities, you can start transacting on these platforms. You do not have to pay any transaction fees. Platforms such as Bondskart and BondsIndia make money by interest earned on the stock of bonds they hold and the difference earned from the wholesale and retail sale of bonds.
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To buy bonds on Bondskart, you must place a minimum order of $2 lakh, which is the same as the minimum transaction amount for RTGS (Real Time Gross Settlement). Once you place the order, you get the deal sheet.
Upon confirmation of the order, the funds are transferred via RTGS from your bank account to the exchange’s bond platform.
The bonds are then transferred from Bondskart to the exchange’s bond platform for transfer to your demat account. Routing the transaction through the exchange (rather than the platform and the investor) helps ensure that there is no counterparty risk.
India also follows a similar process for transactions costing $2k and above. In the case of low-value transactions, the transfer of funds and bonds is made between BondsIndia and the investor directly, although the transaction still has to be reported to the exchanges.
At BondsIndia, you need to purchase at least one unit of any bond, no matter how small or large the investment is. Axis Direct YIELD also requires a minimum investment of ₹ 2 lakh.
When it comes to buying and selling bonds, unlike stocks, adequate liquidity is often a concern. However, according to both Bondskart and BondsIndia, since the bonds for sale on their website are backed by stock, orders are executed smoothly. Likewise, when an investor wants to sell the bonds, Bondskart itself buys the bonds that are put up for sale. India facilitates the selling process by arranging buyers or purchasing the bonds itself.
According to Axis Direct, which does not keep an inventory of bonds on its books, it contacts bond houses to execute trades whenever a sell order is placed.
Finally, it’s worth repeating – while buying and selling bonds seems easier thanks to many fixed income platforms, there’s no need to get around doing some due diligence on the bond issuers themselves (not just on the transaction platform) before you invest.