Cabinet Clears Debt-Based Bharat Bond Exchange-Traded Fund

Bharat Bond will be the country's first debt-based ETF, which comes after two such equity-based funds.

Cabinet Clears Debt-Based Bharat Bond Exchange-Traded Fund

Finance Minister Nirmala Sitharaman said the Bharat Bond ETF will help strengthen India's bond market

The Union Cabinet on Wednesday cleared a bond exchange-traded fund programme, called Bharat Bond. Aimed at strengthening the country's bond market and boosting retail investor participation, the Bharat Bond ETF will constitute bonds issued by the central public sector enterprises (CPSEs) and public financial institutions, Finance Minister Nirmala Sitharaman said. "We are happy to deepen the bond market in the country and through this we want retail investors to participate in bond market," the Finance Minister said.

Here are 10 things to know about Bharat Bond ETF:

  1. The Bharat Bond ETF will provide government companies, financial institutions and other organisations an additional source of funding, apart from bank financing, an official statement said.

  2. The Bharat Bond will be the country's first debt-based ETF, which follows the launch of two equity-based ETFs by the government. 

  3. Finance Minister said the Bharat Bond ETF will help in deepening the country's bond markets after launch of equity-based Bharat 22 ETF in 2014, which received a good response from investors.

  4. The Finance Minister said the in-principle nod to the Bharat Bond ETF was a major decision by the Cabinet, which also cleared six other bills on Wednesday.

  5. The bond ETF will provide investors safety, liquidity and predictable tax efficient returns, the statement said. 

  6. Retail investors will be able to participate in the development of the nation through easy and low-cost access to bond markets, the government said.

  7. The Bharat Bond ETF will be available to retail investors starting at Rs 1,000, which will attract those not participating in the bond markets due to liquidity and accessibility constraints. "Retailers can happily go and trade and will not have to wait till maturity," the Finance Minister said.

  8. Each ETF will have a fixed maturity date, starting with two maturity series: three years and 10 years. The index will be constructed by the NSE, the government said.

  9. The bonds will be sold at exchanges, through market makers and through asset management companies (for large investors). The minimum ticket size for large investors will be Rs 25 crore, the government said.

  10. The market makers will be required to have an ETF inventory worth Rs 1 crore to be able to participate, Ms Sitharaman added.

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