The Cabinet Committee on Economic Affairs has given its approval for creation and launch of Bharat Bond Exchange Traded Fund (ETF) to create an additional source of funding for Central Public Sector Undertakings (CPSUs) Central Public Sector Enterprises (CPSEs), Central Public Financial Institutions (CPFIs) and other Government organizations. Bharat Bond ETF would be the first corporate Bond ETF in the country. It is expected to create new eco-system – Market Makers, index providers and awareness amongst investors – for launching new Bond ETFs in India. Also it will eventually increase the size of bond ETFs in India leading to achieving key objectives at a larger scale – deepening bond markets, enhancing retail participation and reducing borrowing costs.
The ETF will basket of bonds issued by CPSE/CPSU/CPFI/any other Government organization Bonds (Initially, all AAA rated bonds) which matures on or before the maturity date of ETF. The bonds will be tradable on the exchanges. It will have small unit Size of Rs.1000 It would have transparent NAV and portfolio with low cost (of 0.0005%) and fixed maturity date The ETF will track the underlying Index on risk replication basis, i.e. matching Credit Quality and Average Maturity of the Index. It will have maturity period of 3years and 10 years with a separate index of same maturities constructed by an independent index provider (NSE).
The benefits to investors from the Bond ETF are as follows
The benifits to issuers (Govt org.) from the Bond ETF are as follows