NRI Bonds

For Non-Resident Indians (NRIs), bonds offer a relatively safe way to invest in India with predictable returns without the volatility of the equities. However, there are specific considerations related to tax, eligibility and documentation that NRIs must keep in mind before investing in bonds.

High returns

Earn fixed returns of up to 13.25%

Low investment

Start investing with as little as ₹1,000

Low risk

Invest in AAA–BBB rated bonds

No brokerage

0% brokerage or commission fees

Explore Bonds by Category

High Yield

ICRA BBB

You Invest

₹9,949

Returns (YTM)

13.25%

You Get

₹11,493

Today

15 months

Invest in Tencent Backed, Digitally-Driven NBFC Managing an AUM of 1,700+ Cr

You Invest

₹9,949

Returns (YTM)

13.25%

You Get

₹11,493

Today

15 months

Invest in Tencent Backed, Digitally-Driven NBFC Managing an AUM of 1,700+ Cr

ICRA BBB

ACUITE BBB+

You Invest

₹9,800

Returns (YTM)

13.25%

You Get

₹12,680

Today

34 months

Listed NBFC, 670+ Cr AUM with 100% Secured Lending

You Invest

₹9,800

Returns (YTM)

13.25%

You Get

₹12,680

Today

34 months

Listed NBFC, 670+ Cr AUM with 100% Secured Lending

ACUITE BBB+

CARE BBB+

You Invest

₹1,01,274

Returns (YTM)

12.75%

You Get

₹1,17,652

Today

28 months

Listed NBFC backed by Kedaara Capital with 47% Capital Adequacy Ratio

You Invest

₹1,01,274

Returns (YTM)

12.75%

You Get

₹1,17,652

Today

28 months

Listed NBFC backed by Kedaara Capital with 47% Capital Adequacy Ratio

CARE BBB+

What are NRI Bonds?

NRI Bond is not a formal asset class or a bond category. It is simply a collective term that describes those Indian bonds that NRIs (Non-Resident Indians) can invest in. Long back there used to be bonds issued especially for NRIs such as Resurgent India Bonds (1998) and India Millennium Deposits (2000). However, these bonds have long been discontinued and now no other similar bond scheme is currently being offered to the public.

How to Buy Bonds through Paisabazaar?

Get up to 13.25% from bonds in 5 simple steps

Step 1: Login to your Paisabazaar account

Step 2: Select the Bonds

Step 3: Complete the KYC process

Step 4: Enter bank details

Step 5: Link your demat account

Types of Bonds for NRI

Subject to FEMA guidelines and issuer eligibility, here are some of the common types of bonds that NRIs can invest in:

Corporate Bonds

Bonds issued by Public Sector Undertaking (PSUs) - PSUs are government-owned companies. The central government, state government or both can grant PSU status to a company if they hold at least 51% of its paid-up share capital. National Highway Authority of India (NHAI), PFC, IRFC and REC are a few examples of PSU companies. These companies issue bonds to receive funding for financing large infrastructure projects. As these companies have substantial government support, they can be a great option for NRIs seeking great returns and safety.
Bonds issued by Companies - Corporate Bonds are issued by public and private sector companies to raise capital from investors. These bonds serve as an important source of funding for companies looking to finance expansion, manage operations or refinance existing debt.

Dated Government Securities (Dated G-Secs)

Dated G-Secs are securities carrying a fixed or floating interest rate (coupon), which is paid on the face value of the bond on a half-yearly basis. The tenor of dated government securities ranges from 5 years to 40 years.

Central Government Bonds - Government bonds are issued by the Central Government. These bonds are usually issued for the tenures of 5 to 40 years and the interest payments are made at half yearly intervals.
State Development Loans (SDLs) - Government bonds issued by the State Governments are known as SDLs. These types of bonds have almost similar credit risk profiles as the Central Government bonds as the RBI directly monitors maturity and interest payments of these bonds. RBI also has the power to make the interest and maturity pay-outs for these bonds from the Central Government’s budgetary allocation.
Municipal Bonds - Urban local bodies of India issue municipal bonds to raise money for financing various public infrastructure and developmental projects. Issuing bonds helps these local bodies in their endeavors of urban development without depending solely on state or central government.

Treasury Bills (T-Bills)

T-bills are issued by the Government of India to meet its short-term funding requirements. They are issued in three tenors, 91 day, 182 day and 364 day. They are issued at a discount and redeemed at the face value at maturity. Since they are zero coupon securities, they offer no interest to investors.

Debt Mutual Funds

Debt mutual funds is a mutual fund category that invests majorly in fixed income securities such as government bonds, corporate debentures and other money market instruments. As compared to equity mutual funds, these mutual funds generate relatively stable returns and provide better safety. This makes them ideal for risk-averse NRI investors seeking capital preservation, liquidity and potentially better returns than traditional fixed deposits.

Foreign Currency Convertible Bonds (FCCBs)

FCCBs are bonds issued by Indian companies and are expressed in foreign currency. The principal and the interest in respect of which is payable in foreign currency. Further, the bonds are required to be issued in accordance with the scheme and subscribed by a non-resident in foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole, or in part, on the basis of any equity related warrants attached to debt instruments.

Eligibility Criteria for Investing in NRI Bonds

For being foreign portfolio investor, the applicant should be:

The applicant should not be a resident in India or non-resident Indian (NRI).
The applicant should be a resident of a country:
- whose securities market regulator is a signatory to the International Organization of Securities Commissions (IOSCO) Multilateral memorandum of understanding (MOU) or the bilateral MOU with SEBI
- whose central bank is a member of the Bank for International Settlements, provided that the central bank applicant need not be a member of Bank for International Settlements; and
- against whom the Financial Action Task Force (FATF) has not issued any warnings.
The applicant can also be incorporated or established in the International Financial Services Centre (IFSC).
The applicant must be a ‘fit and proper’ person as prescribed.

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Documents that NRIs Require for Investing in Bonds

The list of documents that NRIs might require for investing in bonds may vary across platforms. However, the general set of documents that NRIs should have handy includes:

PAN Card
Passport
Overseas address proof
Recent photographs
NRO/NRE bank account
Demat account

Tax Implications for NRIs Investing in Bonds

As an NRI, only your earnings made in India and not your income sourced from outside India would be taxable. Taxation on bonds in India involves two main components, interest income and capital gains. NRI capital gains are taxable at 12.5% or 20% slab rates (plus applicable surcharge and cess), subject to the type of investment, holding period and listing status of the bond.

Things NRIs Should Consider Before Investing in Bonds

Here are a few things that NRI investors should consider before investing in bonds in India:

Check credit rating of the bond issuing company - Before investing in a bond, NRIs should check the bonds credit rating. It’s a preliminary check that will help NRIs sieve out riskier bond options from their list.
Compare Yield-to-Maturity (YTM) - YTM of a bond is the annualised rate of return if the bond is held till its maturity date. Thus, while comparing a bond issuer’s credit rating, compare its YTM also. Usually, bonds having a lower credit rating have higher YTMs and vice versa. Thus, make your pick as per your risk appetite.
Look into the bond issuer’s financial standing - Credit ratings may not measure many of the other factors that investors must consider with respect to risk. Therefore, instead of relying on credit ratings alone, investors should also look deeper into the bond issuing company’s financials to make an informed decision.
Check frequency of the coupon payment - One of the major benefits of investing in a bond is that it offers a regular source of income in the form of interest (coupon) payments. These payments are made at regular intervals such as monthly, quarterly, half-yearly and annually. Therefore, before buying bonds in India, check the frequency of its coupon payments and make sure that it aligns with your cash flow requirements.

How NRIs Can Invest in Bonds?

There are multiple ways through which NRIs can invest in Bonds. Some of them are discussed below:

RBI Retail Direct

The RBI has a dedicated portal for individual investors, including NRIs, who want to invest in government securities such as G-secs, T-bills and SDLs. Another benefit of investing through this platform is that it does not charge brokerage, commission, annual or any account opening fees, thereby, making it the most direct and cost-effective way to buy government securities in the primary market.

Online Bond Platforms

NRI investors who want to invest in Corporate and PSU Bonds for higher yields can do so through SEBI-regulated Online Bond Platforms (OBBPs). These platforms aggregate various bond issues, showing credit ratings, yield to maturity along with other bond features. Such platforms are quite popular among investors and are easy to use. NRIs can buy through them directly through their interface using their NRE/NRO accounts.

Traditional Brokers & Banks

NRIs who prefer investing through a relationship based approach instead of self-service mobile apps can invest via traditional brokers and banks. already having a 3-in-1 account (Savings + Demat + Trading) with a bank can buy bonds through their NRI investment desks.

Secondary Market

In the secondary market, NRIs can also buy listed bonds through stock exchanges (NSE or BSE) just like they buy stocks. They can trade listed bonds directly through their existing NRI Demat and Trading account (linked to an NRE/NRO account) and exit before maturity by selling it to another investor.

Guidelines for Investing in India as an NRI

Before you start investing in India as an NRI, you should comply with the prevailing FEMA guidelines including:

You should be classified as an NRI and have a Permanent Account Number (PAN) card.
To invest in stocks and convertible debentures, you will need to have a demat and trading account with a registered broker or bank under PINS.
For mutual funds, you can start investing with your NRE/NRO accounts either through your bank, broker, or AMCs.

You will also need an NRO or an NRE bank account to make investments. You can choose to invest in India either on a repatriable or non-repatriable basis.

If you invest through an NRE account, then the entire proceeds from investments are fully repatriable.
If you invest from your NRO account, then the proceeds are repatriable only up to USD 1 million cumulatively for all NRO accounts held in India per Financial Year (April-March).

How to Buy Bonds through Paisabazaar?

Get up to 13.25% from bonds in 5 simple steps

Step 1: Login to your Paisabazaar account

Step 2: Select the Bonds

Step 3: Complete the KYC process

Step 4: Enter bank details

Step 5: Link your demat account

FAQs

Yes, you can invest in bonds issued by Indian companies or the government while staying abroad.

The investment limit depends on the types of bonds that NRIs are investing in. For instance, under the Fully Accessible Route (FAR), there are no investment limits for NRIs in specified government bonds. Also, NRIs are generally limited to 5% of the total paid-up value of corporate bonds issued by an Indian company.

The investment amount varies across bonds. The minimum amount required will be displayed clearly on the platform from where NRIs are placing their purchase.

To invest in bonds in India, NRIs will need to first open NRE /NRO bank accounts, get a PAN, open a demat account (in investing in bonds indirectly through bond funds), complete KYC and provide other details as required by the bank/online platform from where they investing.