What Are Psu Bonds And How To Invest In Them

By Author: Ravi
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If you are looking for a fixed income option that offers better returns than savings accounts and more stability than equities, PSU bonds might be worth your attention. These are bonds issued by Public Sector Undertakings or government-owned companies. They combine the benefits of steady income and relatively low risk which makes them a good choice for conservative and long-term investors.
Let us understand what PSU bonds are how they work and how you can invest in bonds like these with ease.
 
What Are PSU Bonds?
PSU stands for Public Sector Undertaking. These are companies in which the government holds a majority stake. Some well-known PSUs in India include companies like REC Power Finance Corporation National Highways Authority of India and Indian Railway Finance Corporation. These companies often need funds for long-term infrastructure or development projects and they raise this money by issuing bonds to the public.
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... PSU bonds are debt instruments. When you buy one you are lending your money to the PSU and in return they promise to pay you regular interest and repay your money at the end of the bond’s term. Because these bonds are issued by government-backed companies they are considered safer than bonds from private firms.
 
Key Features of PSU Bonds

Fixed Interest
PSU bonds generally offer fixed interest also called a coupon. This interest is paid out regularly usually every six months or annually.
Long-Term Tenure
Most PSU bonds come with a tenure of 5 to 15 years. Some may be even longer depending on the nature of the project being funded.
Credit Ratings
These bonds are often rated by agencies like CRISIL ICRA and CARE. Many PSU bonds carry high credit ratings because of the government backing.
Listed on Exchanges
Many PSU bonds are listed on stock exchanges which means they can be bought or sold in the secondary market before maturity.
Minimum Investment Amount
The minimum amount required to invest in these bonds is usually ₹10,000 or ₹1 lakh depending on the issue.

 
Why Should You Consider PSU Bonds?

Safety: Since PSU bonds are backed by government-owned entities the risk of default is very low.
Regular Income: You get fixed interest payments which makes it a good option for people looking for steady cash flow.
Better Returns than FDs: The interest offered by PSU bonds is usually higher than what fixed deposits give.
Diversification: Including these bonds in your portfolio helps balance risk especially if you are also investing in equities or mutual funds.
Tax Benefits (in Some Cases): Some PSU bonds may offer tax exemption under certain sections though most are taxable. Always check the bond details before investing.

 
How to Invest in PSU Bonds
It is now easier than ever to invest in bonds thanks to online platforms and better access to information. Here are a few ways you can invest in PSU bonds:

Primary Issuance
Sometimes PSU bonds are offered directly to the public through a public issue. You can apply during the open window using your bank or demat account.
Secondary Market
You can also buy PSU bonds from the stock market if they are listed. Use your demat account to purchase these just like you would buy shares.
Online Bond Platforms
Many SEBI-registered digital platforms allow you to browse available PSU bonds compare returns and place your order with just a few clicks.

 
Final Thoughts
PSU bonds are a solid option for investors who want to earn fixed returns without taking too much risk. With interest rates higher than traditional bank deposits and the backing of government-owned companies they offer a balance of return and security. Whether you are planning for retirement or just want to diversify your fixed income holdings PSU bonds can be a dependable choice.
If you are ready to invest in bonds that offer safety and stability PSU bonds are a great place to start.