Government bonds are a type of government-issued financial instrument and are managed under the supervision of the Reserve Bank of India (RBI). These bonds are sold to the Indian public by the government to raise capital for public welfare projects. The government pays interest at a fixed or regular rate to investors who buy these bonds. The bond’s face value is paid to the investors at the time of maturity.
Recently, India has allows individual investors to participate in the USD 1 trillion government bond market, in order to raise capital for public expenditures.
Read on to get a quick summary of how small investors can benefit from the government bonds scheme.
Experts have stated that the introduction of this scheme is essential as it can help in balancing out the influx of foreign investments with domestic investments in order to ensure economic stability. However, they also note appetite for long-term low-interest bonds is uncertain as global monetary policies are being tightened to fight inflation and interest rates are likely to rise. However, the expectation is that the investment will pick up in due time.
Government bonds are a viable and risk-free investment for smaller investors, as all interest payouts are guaranteed by the government. Hence when you invest in bonds of this nature, your risk exposure is considerably reduced.
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