Invest in Government Bonds in India: Top 10 Bonds to Buy Now


Government bonds are one of the safest methods for wealth creation and contribute to national development. Government bonds in India give an individual a safe and risk-free option to invest money for a better option of portfolio diversification.

In this article, we will discuss the meaning of government bonds, and in a step-by-step guide, how to buy government bonds in India, while also getting an insight into the top 10 promising government bonds.

What are Government Bonds?

Government bonds are generally considered as debt securities that the government issues to fund its financial needs, including infrastructural projects, etc.

The wide scope of government bonds is used to manage the country’s fiscal deficit. Government bonds classify very low-risk investments since the government assures the holder of the debt to pay specified amounts on specific dates towards the principal and at the agreed-upon interest.

They are a great option trading technique for conservative investors seeking stability and predictable returns.

How to Buy Government Bonds in India?

Digital platforms have made it easier to buy Government bonds. Anyone can buy these bonds by following the steps below.

  1. Set Up a DEMAT Account: Start by setting up a DEMAT account, which can be opened via brokrage firms or banks that provide DEMAT services.
  2. Register on RBI’s Retail Direct Portal: A dedicated portal for retail investors is offered by the Reserve Bank of India to purchase government securities like bonds direclty.  Registering on this portal requires KYC compliance but its a very easy process.
  3. Explore Available Bonds: After registration, investor can explore different bonds with their different conditions for maturity, interest rates, and risk levels.
  4. Participate in Auctions: You can either buy Government bonds from primary auctions that are conducted by RBI or from the secondary market. Retail Direct portal allows users to directly participate in these auctions. 
  5. Make a Purchase: After you have made your choice, purchase the bonds of your choice. These bonds will be available in your DEMAT account and interest will be disbursed in your bank account.
  6. Monitor and Manage Your Bonds: You will be able to track your date of maturity and date of interest payment and be able to transfer your bond holding through the DEMAT and the RBI Retail Direct portal.

Top 10 Government Bonds to Buy Now in India

Now, let’s look at the top 10 government bonds from the list presented below, offering particularly attractive investment opportunities:

1. 7.75% Government of India Savings Bond

    • Features: A high coupon rate of 7.75% is for an investor’s grab, credited semi-annually.
    • Positives: With a tenure of ten years, this is an excellent security for the long-term investor looking for a steady source of income and high safety.
2. RBI Floating Rate Savings Bonds
    • Features: A bond that keeps interest rates linked to the extant rate of the government securities and hence remains attractive.
    • Positives: It provides inflation protection since payouts arise with market conditions.

3. 10-Year Government Bond

    • Features: This bond typically offers fixed returns, with the current yields around 6.5%.
    • Positives: This bond is best suited to a medium-to-long-term investor who is looking for predictable outcomes and a safe investment.

4. 5-Year Government Bond

    • Features: This bond matures more quickly, completing in just five years, making it suitable for a short-term investing strategy.
    • Positives: It will provide a safer alternative for conservative investors by reducing interest rate risk compared to that of longer maturity bonds.

5. Government of India Treasury Bills

    • Features: These are short-term instruments, with security maturing within a year, sold at a discount to face value.
    • Positives: These offers, due to their negligible default risk, enjoy high liquidity and are thus an ideal short-term surplus investment.

6. Government Securities Linked to CPI

    • Features: In an interesting move, pay-outs are linked to the Consumer Price Index (CPI), ensuring that the returns of the investor are positively related to inflation.
    • Positives: This is best suited for investors having preferences for safety, looking to invest in a risk-free asset but wanting to hedge inflation risks.

7. Sovereign Gold Bond

    • Features: These innovative bonds are denominated in grams of gold, enabling the investor to earn interest alongside being exposed to gold price movements. In terms of providing an alternative to holding physical gold, with additional interest income on top of it.
    • Positives: It provides an alternative to holding physical gold, with additional interest income and tax benefits.

8. Infrastructure Bonds

    • Features: These are the bonds issued by government-linked entities to raise money for infrastructure project funding.
    • Positives: Infrastructure bonds are usually issued with the benefit of being tax-free under Section 80C of the Income Tax Act and generally with mediocre returns.

9. State Development Loans (SDLs)

    • Features: SDLs are bonds issued by state governments, and although they are always slightly riskier by nature versus central government ones, they offer slightly higher yields as well.
    • Positives: A good option for those with moderately higher risk appetite and who would like to diversify their investments into offering different types of government bonds.

10. Bharat Bond ETF

    • Features: It is an exchange-traded fund that offers an opportunity to the investor to invest in a portfolio comprising government-owned company bonds.
    • Positives: High transparency, low cost, and predictable tax-efficient returns for retail investors.

Final Words

Government bonds in India are a wise choice for investment to gain financially safe and stable returns. Whether you have a short-term goal or want to invest in the long term, the variety in government bonds has alternatives for all kinds of investment needs. With the knowledge of acquiring these bonds and the top offers of the market, investors can get an enriched portfolio to realize the financial goals.

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