ETF: ETF to be invested in bonds approved, expected to hit the market this month

Bharat Bond ETF: Bharat Bond ETF will be the first corporate bond ETF in the country. This will increase the participation of retail investors who are not participating in the bond market due to lack of cash and lack of access.

New Delhi: The government on Wednesday approved the proposal to start a Common Investment Fund called Bharat Bond Exchange Traded Fund (ETF), whose units will be invested in public sector undertakings and government sector bonds.

The Union Cabinet took this decision on Wednesday. The new fund offer (NFO) of this ETF is expected to be presented in December itself.

After getting the cabinet approval headed by Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman said, “With the creation of this wide-ranging ETF and its introduction, we hope to have a large investor base.” He said that as announced in the budget, it will help in expanding the bond market in the country.

Currently, in the ETF operated by the government, the funds of investors are invested in the shares of select government companies. Units of such funds can be bought and sold in share markets.

Sitharaman said about the decision of this bond ETF that the launch of this fund will help to raise additional funds for government companies and other government organizations. ‘He said that this ETF has been issued by government companies or any government organization There will be bonds and they can be traded in the stock markets. He said that the face value of one unit of it will be kept at one thousand rupees so that even small investors can invest in it.

Sitharaman said that every ETF will have a revival date. For now, there will be two maturity categories of three years and 10 years. “We are expecting NFO to start this month,” Tuhin Kant Pandey, Secretary, Department of Investment and Public Asset Management (Deepam), told reporters. 

He said that ETF would be offered every six months and NSE would structure its index. The Finance Minister said, “Bond ETFs will provide security, liquidity and predictable low-tax income.” This will allow retail investors to invest in small amounts of bonds, giving them easy low-cost access to the bond market.

The Finance Minister said that due to increasing demand for these bonds, the issuers will be able to take loans at a lower interest rate, which will reduce their debt repayment burden for a period.

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