If you have been investing in fixed deposits or debt funds in the last two years, you have probably noticed reinvestment rates falling. The repo rate set by the RBI was reduced by a total of 125 basis points in 2025, bringing it down from 6.50% to 5.25%, where it has remained since December 2025. When a debt instrument matures, the rate on offer for the next investment is typically less than the previous one, a pattern known as reinvestment risk.
One way to tackle this issue is bond laddering. Instead of having your entire debt allocation mature at the same time, you can split it up and have it mature at different times. This means that only a small part of your debt allocation will come due and be reinvested each time. This does not eliminate exposure to falling rates, and it does not guarantee any particular outcome; it is simply a structuring approach used to diversify reinvestment timing.
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What Is Bond Laddering?
In a bond ladder, the various debt instruments maturing in different years are called “rungs.” Each rung is replaced with new debt instruments when it matures. The new instrument is invested in at the then-current rate, while the remaining rungs keep earning at the earlier locked-in rates. This spreads reinvestment risk over time rather than concentrating it at one maturity date. While this is useful, it is important to note that this is not a guarantee of a positive return, as the actual interest rates and the credit risk of the issuers at the time of reinvestment also have an impact on returns.
Current Rate Environment
The repo rate in India has been at 5.25% since the February 2026 meeting, after a 25 basis point cut in December 2025. The benchmark 10-year G-Sec yield declined by 17 basis points in 2025, primarily due to the RBI’s bond purchases and the broader rate-cutting cycle. However, the 10-year G-Sec yield reached around 6.87% by late August 2026, and the RBI’s policy minutes indicated that it would lean towards increasing rates if inflation, which was at 4.45% in July 2026, remained above target.
Instruments Commonly Used to Build a Ladder
The following are commonly available debt and savings instruments in India that investors may use across different maturity rungs. Availability, current rates, and eligibility criteria vary and should be verified from the issuer or official source before investing. Not all of these are listed debt securities transactable through an Online Bond Platform; several are government savings schemes or mutual fund products offered through separate channels.
Near and short-tenor instruments (0–3 years):
- Treasury Bills (T-Bills): short-term sovereign instruments in 91-, 182-, and 364-day tenors. Available through RBI Retail Direct and OBPPs.
- Bank and company fixed deposits: have varying tenures and are readily available. Company fixed deposits carry credit risk and are issued by companies rated by credit rating agencies. Investors should evaluate the rating before investing.
- Post Office Time Deposits (POTD): Government savings instruments with tenures of 1, 2, 3, and 5 years, which are offered through India Post.
- National Savings Certificate (NSC): 5-year government savings instrument with an associated Section 80C tax benefit; rate is fixed at the time of investment and reset quarterly by the government for new investments.
- Short-duration target maturity funds: SEBI-registered mutual fund schemes investing in G-Secs, SDLs, and PSU bonds with a defined maturity date. Mutual Fund investments are subject to market risk. Please read the scheme information document carefully before investing.
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Medium-tenor instruments (3–5 years):
- Senior Citizen Savings Scheme (SCSS): 5-year government savings scheme (extendable by 3 years) that offers quarterly payouts; available to eligible senior citizens through banks and post offices.
- Non-Convertible Debentures (NCDs): Listed bonds issued by corporations that can be purchased and traded through a demat account, including through OBPPs. NCDs carry issuer credit risk; before investing, clients should consider the credit rating and rating rationale published by the credit rating agency and should not treat any indicated rate as guaranteed.
- Fixed Maturity Plans (FMPs): Closed-ended SEBI-registered debt mutual fund schemes holding bonds to a target maturity date. Subject to mutual fund market risk.
Long-tenor instruments (5–10+ years):
- Government Securities (G-Secs) and State Development Loans (SDLs): Sovereign and state-government debt instruments carrying government backing. G-Secs and T-Bills can be purchased through RBI Retail Direct or listed OBPPs. SDLs are most consistently accessible via RBI Retail Direct. While default risk is low with sovereign backing, there is still the risk of changes in market conditions and interest rates. Prices can vary before they mature.
- Long-duration target maturity funds: As above, subject to mutual fund risk disclosures.
- RBI Floating Rate Savings Bonds (FRSB 2020): A 7-year government bond with a coupon reset every six months, linked to the prevailing National Savings Certificate rate plus a spread. The rate is not fixed for the full tenure and should not be read as a guaranteed or fixed return.
- Kisan Vikas Patra (KVP): A government savings certificate with a fixed maturity value determined at the time of investment; the applicable maturity period and rate are set by the government and subject to periodic revision for new investments.
Instruments not suited to a ladder structure: Perpetual bonds, including AT1 bonds issued by banks, have no fixed maturity date and are therefore structurally unsuited to a laddering approach regardless of any indicated coupon.
Illustrative Maturity Mapping
| Rung | Time to Maturity | Instrument Types Commonly Used |
| Near | 0–1 yr | T-Bills, POTD |
| Short | 1–3 yrs | FDs, NSC, short-duration TMFs |
| Medium | 3–5 yrs | SCSS, rated NCDs, FMPs |
| Long | 5–10 yrs | G-Secs, SDLs, long-duration TMFs |
| Very Long | 10+ years | KVP, long-tenor G-Secs, FRSB |
This table is illustrative and for educational understanding only. It is not a recommendation to buy, sell, or hold any specific instrument, and actual allocation should be based on individual financial goals, risk appetite, and consultation with a qualified advisor.
A Note on Taxation
Interest from small savings instruments (SCSS, NSC, POTD) is generally taxed at the investor’s applicable slab rate as it accrues or is paid out. Gains from mutual fund schemes (TMFs and FMPs) are taxed upon redemption, generally at the slab rates as well, unless specified otherwise. Tax treatment is subject to the Income Tax Act and applicable notifications, and investors should consult a tax advisor for their specific situation, as this article does not constitute tax advice.
Who This Approach May Be Relevant For
This structuring approach may be relevant for investors seeking to diversify reinvestment timing across their debt allocation. It is not suitable for all investors and does not guarantee any specific outcome, income level, or protection against loss. Individual suitability depends on financial goals, liquidity needs, and risk tolerance.
Bond Laddering FAQs
No. Laddering is a structuring approach to diversify reinvestment timing; it does not guarantee returns, and outcomes depend on actual market rates and issuer performance over time.
No. OBPPs are permitted to offer only listed debt securities such as G-Secs, T-Bills, listed SGBs, listed municipal debt, listed securitized debt, and listed NCDs. FDs, NSC, SCSS, POTD, KVP, and mutual fund schemes are offered through separate, non-OBPP channels.
No. FRSB rates reset every six months in line with the NSC rate. KVP and NSC rates are fixed at the time of investment but are revised periodically by the government for new investments.
No. G-Secs and SDLs carry sovereign/state government backing, while NCDs carry issuer-specific credit risk. Investors should review the applicable credit rating and rationale before investing.
Disclaimer
Fixed returns do not constitute guaranteed or assured returns. Investments in corporate debt securities and municipal debt securities/securitized debt instruments are subject to credit risks, market risks, and default risks, including delay and/or default in payment. Read all the offer-related documents carefully. This blog/article should not be construed as financial advice or as an offer or recommendation to buy or sell any security or any products/services of/on GoldenPi or any product/services of its third-party client(s). For a detailed calculation of YTM, visit our website. T&C’s Apply.
