List of NBFC Bonds
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Its name itself is a clear indicator of the meaning of NBFC bonds. NBFC bonds are those issued by Non-Banking Financial Companies (NBFCs). NBFCs have a lending business that is similar to that of banks. However, unlike banks, NBFCs can only accept term deposits if approved by the Reserve Bank of India (RBI). Therefore, they use different means to get funds for lending. This is where NBFC bonds step in. Usually, the interest rate offered by an NBFC bond is on the higher end, yet it depends on their respective credit ratings.
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Name | Issue Size | Maturity | Coupon |
---|---|---|---|
Kotak Mahindra Prime Limited | 40.00Cr | 22 Jun 2023 | 10.50 % |
Poonawalla Fincorp Limited | 35.00Cr | 07 Dec 2026 | 10.40 % |
Poonawalla Fincorp Limited | 15.00Cr | 06 Jan 2027 | 10.40 % |
Poonawalla Fincorp Limited | 25.00Cr | 24 Jan 2027 | 10.40 % |
Poonawalla Fincorp Limited | 15.00Cr | 03 Mar 2027 | 10.25 % |
Poonawalla Fincorp Limited | 5.00Cr | 06 Jun 2025 | 10.20 % |
HDB Financial Services Limited | 100.00Cr | 17 Oct 2023 | 10.20 % |
HDB Financial Services Limited | 80.00Cr | 18 Mar 2024 | 10.19 % |
Bajaj Finance Limited | 500.00Cr | 19 Sep 2024 | 10.15 % |
Tata Capital Financial Services Limited | 100.00Cr | 26 Sep 2024 | 10.15 % |
All You Need To Know About NBFC Bonds
Who Issues NBFC Bonds?Benefits of NBFC BondsDrawbacks of NBFC BondsHow to Calculate Yields of NBFC Bonds?How are NBFC bonds taxed?Who Should Invest in NBFC Bonds?Who Issues NBFC Bonds?
Non-Banking Financial Banks, or NBFCs, issue these bonds to retail and institutional investors. They can issue various kinds of bonds, such as Commercial Papers (CPs), Non-Convertible Debentures (NCDs), and Market Linked Debentures (MLDs).
Also Read: Which NBFCs Does Wint Wealth Choose to Work With?
Benefits of NBFC Bonds
NBFC bonds have several benefits, as discussed below:
- NBFC bonds usually pay higher interest than bank fixed deposits.
- Presently the NBFCs that issue these bonds are reputed and well-capitalised, carrying higher credit ratings. Hence, it makes them a credible investment.
- NBFC bonds are regulated by the Reserve Bank of India (RBI), making them relatively less risky.
Drawbacks of NBFC Bonds
As every coin has two sides, so do NBFC bonds. Below we have listed a few drawbacks of NBFC bonds:
- Although they carry higher credit ratings or are regulated by the RBI, NBFC bonds are risky. They do carry risks such as interest rate risk, reinvestment risk, and so on.
- Moreover, as the chief purpose of issuing these bonds is to further lend to borrowers, they inherently carry credit risk.
How to Calculate Yields of NBFC Bonds?
A yield is a number that shows the returns of any bond. Many times it is referred to as Yield to Maturity (YTM). You receive interest payments based on the coupon rate. You can calculate the YTM using the below formula:
YTM = [Annual Interest + {(FV - Price)/Maturity}]/[(FV+Price)/2]
Where,
YTM = Yield to Maturity
Annual Interest = Coupon payment that you receive annually.
FV = Face Value
Price = Current Market Price of the Bond
Maturity = Number of years left till maturity
Let’s take an example to understand it better. Assume you invest in a bond having the following characteristics:
Particulars | Values |
Face Value | ₹1,000 |
Annual Coupon Rate | 7% |
Annual Interest Payout | ₹70 |
Time to Maturity | 5 years |
Current Market Value of the Bond | ₹850 |
So, if we plug in all the values in the above formula, the YTM for the bond in the example works out to be 10.8%:
YTM = [70 + {(1000-850)/5}] / [(1000+850)/2]
However, if we change the bond's current market value to ₹1,100, the YTM is 4.8%. From this, we can understand the relationship between YTM and bond prices. As and when YTM increases, bond prices decrease and vice versa.
However, a lot of people often confuse YTM with coupons. A coupon is a predetermined rate when you buy the bond, while the YTM is the prevailing market rate of the bond.
How are NBFC bonds taxed?
NBFC bonds are taxed similarly to other debt securities excluding tax-saving bonds. In the case of NBFC bonds, any interest earned is taxed as per the individual tax slabs.
For listed NBFC bonds, any period above 12 months is considered long-term. Hence, those gains arising before the 12 months are deemed Short-Term Capital Gains (STCG). Otherwise, it is regarded as a Long-Term Capital Gains Tax (LTCG). If the same are unlisted, then the period is 36 months.
In the case of STCG, the gains are added to the investor’s income and taxed as per individual tax slabs. In the case of LTCG, gains are taxed at 10% without indexation benefit if listed and 20% without indexation benefit if unlisted, plus any surcharge. Moreover, even the Tax Deducted at Source (TDS) of 10% applies.
Who Should Invest in NBFC Bonds?
These bonds might be suitable for those who have a high-risk appetite and are seeking higher returns. However, if you are someone for whom safety is the top priority, you should consider bank fixed deposits. This certainly depends upon the individual’s risk appetite and financial goal.