Complete Guide on Types of Corporate Bonds Available in India

When I first heard about corporate bonds, my initial thought was—isn’t this something only big institutions and banks deal with? But as I dug deeper, I realized these instruments are now open to individual investors like us. In fact, with the right knowledge, they can be as simple as choosing between an FD and a mutual fund.

If you’re planning to buy corporate bonds, it helps to know the different categories available in India. Think of it like shopping for the right product—each bond type comes with its own features, risks, and benefits.

Why Do Companies Issue Bonds?

Imagine a company that wants to build a new manufacturing plant. Instead of taking a huge bank loan, it can raise money from the public through bonds. Investors like you and me lend money to the company, and in return, we receive interest. The company benefits from funding, and we benefit from fixed income. Simple, right?

But here’s the catch—not all bonds are the same. Just like we compare cars before buying, we must understand the types of corporate bonds before investing.

Major Types of Corporate Bonds in India

1. Secured vs Unsecured Bonds

• Secured bonds are backed by assets. For instance, if a real estate company issues bonds secured against land, investors can claim those assets if the company defaults.
  
• Unsecured bonds, on the other hand, don’t have collateral. It’s like giving a personal loan—you trust the company’s creditworthiness. These usually offer higher interest rates to compensate for the risk.
  

2. Convertible vs Non-Convertible Bonds

• Convertible bonds remind me of a hybrid plan. You start with a bond, and later, if you wish, you can convert it into equity shares of the company. For example, if a tech company grows rapidly, this conversion could give you big gains.
  
• Non-convertible debentures (NCDs) are more straightforward. They remain bonds till maturity, offering fixed interest payouts. Many Indian NBFCs issue NCDs, which are quite popular with retail investors.
  

3. Fixed Rate vs Floating Rate Bonds

• Fixed rate bonds work like fixed deposits. You lock in an interest rate—say 8%—and get that throughout the tenure. Predictable, steady, and ideal if you want certainty.
  
• Floating rate bonds are linked to benchmarks like RBI’s repo rate. So if rates go up, your coupon rises too. For example, in a rising interest rate environment, these bonds can beat FDs easily.
  

4. Callable vs Puttable Bonds

• Callable bonds give the issuer the right to repay early. Think of it as prepaying a home loan when interest rates fall. Companies use this option to save on costs.
  
• Puttable bonds put the power in your hands. If you need money early, you can sell the bond back to the issuer. For someone looking at liquidity, this is a big plus.
  

5. Zero Coupon Bonds

These are fascinating. Instead of regular interest, they’re issued at a discount. Say you invest ₹7,000, and after 10 years, you get back ₹10,000. It’s like planting a mango tree today and enjoying the full harvest later—no fruits in between, but a big reward at the end.

How I Look at Them as an Investor

Over the years, I’ve seen different investors use bonds differently. My retired uncle prefers secured, fixed-rate NCDs for regular income—almost like a pension. My younger cousin, who is fine with a little risk, experiments with convertible bonds from mid-sized companies hoping they’ll grow into the next big success story. Personally, I use a mix. I like floating rate bonds when interest rates are rising and secured NCDs when I want peace of mind.

The Indian Market Perspective

India’s corporate bond market is huge—over USD 2.6 trillion—but retail investors like us still make up less than 2% of it. That means most of the action is still with institutions. But with SEBI regulating Online Bond Platforms (OBPPs), it has become much easier to buy corporate bonds online. Earlier, investing in bonds required knowing someone in the dealing room. Today, it takes just a few clicks.

Final Thoughts

Understanding the types of corporate bonds is like learning the menu before ordering. Once you know what’s available—secured, convertible, floating, callable—you can align them with your needs. Whether you want safety, growth, or liquidity, there’s a bond type that fits.

For me, bonds are not just about “playing it safe.” They’re about balance. In a world where equity markets can swing wildly, bonds give that sense of calm in the background—steady, reliable, and surprisingly versatile.