Public Sector Undertaking Bonds

Features of PSU Bonds

Public Sector Undertakings, owned and administered by a central or state government, issue PSU bonds. These are typically medium or long-term investment plans.

Best for Investors with Low-Risk Tolerance

The government backing significantly reduces the risk of default. Credit ratings of PSU bonds are generally high. It makes these bonds ideal for risk-averse investors like retired individuals.

Long-Term Investment

The tenure of PSU bonds in India can range between 10 to 15 years.

Higher Yields than FD

Carrying low-risk like FDs, Public Sector Undertaking Bonds can generate comparatively higher returns, up to 8.42%.

Safety against Market Fluctuation

Market fluctuations or inflation rates have a low influence on public sector undertaking bonds. Thus, returns are highly ensured.

Liquidity

Bonds issued by public sector companies are highly liquid as they are tradable in the secondary market.

Suitable for High-Income Taxpayers

Listed PSU bonds have a 10% rate of long-term capital gains tax. For unlisted bonds, the rate is 20% with indexation on selling or redeeming after 3 years. Taxpayers from the 30% slab will thus incur 10% less tax.

Benefits of PSU Bonds

• Stable Returns: PSU bonds generate periodic payout on interests till maturity, creating a stable income source. It is highly beneficial for working or retired investors looking for regular income.

• Safe Long-Term Investment: Long-term investments are crucial for growing capital without being influenced by short-term market fluctuations. The bonds offered by government-supported public sector companies can add another safety blanket to the investment.

• Predictable Investment Plan: As these bonds do not need constant monitoring and keep producing fixed returns, carrying this investment plan becomes hassle-free even for newbie investors.

Credit Ratings of PSU Bonds

Credit rating agencies such as CRISIL, ICRA, CARE, IND, and others evaluate and assign credit ratings to NBFC bonds by considering factors like asset quality, capitalisation, earnings, market position, liquidity, and risk management.

The subsequent classification will provide you insight into the creditworthiness of PSUbonds:

• AAA: highest degree of safety, lowest credit risk

• AA-, AA, AA+: high degree of safety, very low credit risk

• A-, A, A+: adequate degree of safety, low credit risk

• BBB-, BBB, BBB+ : Moderate degree of safety, moderate credit risk

• BB: Moderate risk of default

• B-, B, B+: high risk of default

• C: very high risk of default

• D: In default or expected to be in default

Investing in PSU Bonds

You can now explore the to-rated and best-yielding PSU bonds and invest using three simple steps on GoldenPi.

• Step 1: Register your account on GoldenPi.

• Step 2: Select from the long list of PSU bonds.

• Step 3: Monitor your bonds and enjoy returns on maturity.