The Union Cabinet on Wednesday gave its approval to the launch of India’s first corporate bond exchange traded fund (ETF) aimed at diversifying investor base and bring in retail investors in the market. The bond ETF will be listed on the exchanges.
Titled Bharat Bond Exchange Traded Fund, it will provide funds for the needs of central public sector undertakings or any other government organization though bonds issued by them. For now, it will have two maturity tenures, three and ten years.
The ETF will track the underlying index on risk replication basis.
With this, the government hopes to diversify investor base and help companies with greater access to bond markets for their fund needs and not just depend on equity market.
The bond ETF will be listed on the exchanges. This is part of the government’s efforts to deepen the bond market in India which, even after years of efforts by the regulator and the government, continues to be a very small one.
The government had so far allowed only equity ETFs, one launched in 2014 and another in 2017.