UPSC Courses

DNA banner


  • 05 December, 2019

  • Min Read

CCEA okays launch of India’s first debt exchange-traded fund

Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

News: The Cabinet Committee on Economic Affairs approved launch of India’s first fixed income Exchange Traded Fund (ETF) comprising AAA-rated debt securities of state-owned companies.

Prelims and Mains focus: About ETFs and their advantages, key differences between ETFs and mutual funds

About the ETF launched

  • Called Bharat Bond ETF, the fund will comprise a basket of bonds of companies including NHAI, NABARD, PFC and IRFC among others.

  • The fund targets to raise around Rs 10,000 crore. The debt ETF provides a new option to conservative investors to own securities of government-owned companies along with the facility of liquidity as ETF units will be listed on exchanges.

  • Retail investors can buy units of the ETF with a starting investment of Rs 1,000 per unit and it will have maturity of 3 and 10 years. The current yield on 10-year AAA-rated debt paper of state-owned companies is around 7.5-7.6 per cent while that of 3-year similar rated paper is quoting at 6.5-6.6 per cent. Investors can expect a post tax return of around 6.7-6.8 per cent, which is significantly higher than post tax return of around 5.5 per cent on fixed deposits with banks.

  • Each ETF will have fixed maturity date and will track underlying index on risk replication basis. The bond ETF trading on the exchange will help in better price discovery of the underlying bonds.

  • It is the lowest cost mutual fund product in India. Compared to buying units in debt mutual funds, the debt ETF will have a low transaction cost of 0.0005 per cent.

  • Bond ETF will provide safety (underlying bonds are issued by CPSEs and other Government owned entities), liquidity (tradability on exchange) and predictable tax efficient returns.

  • Apart from the interest, investors can make capital gains on their units in the secondary market in a falling interest rate regime. In case the interest rate cycles reverses and turns upward, existing unit holders may have to bear capital losses on their holdings. For bonds that are held till maturity there is no risk of capital loss or gain.

  • As compared to fixed deposits, this instrument is tax efficient as bond ETFs are taxed with the benefit of indexation, which reduces the tax on capital gains for investor.

  • Bharat Bond ETF will provide an additional source of funding for firms to meet their borrowing needs, and thereby helping in deepening the bond market.

  • While there are a number of equity and gold ETFs in the market, there are no debt ETFs, barring the two government securities-based ETF that have not generated much investor interest.

Exchange Traded Fund

Note: To know the difference between ETFs and Mutual Funds click on the link below:


Source: Indian Express

What is Mission Indradhanush ?

Mission Indradhanush was launched in 2014 under the Ministry of Health and Family Welfare.  1. Between 2009 - 2013, only 1% coverage per year has increased. We have to make it to 5%. 2. Objectives of Mission Indradhanush: We have the aim of full coverage by 2020. Cover all those children who are either unvaccinated or are part

Mediation Bill 2021 - Detailed Overview

A Bill that could alter the Mediation landscape The background behind Mediation Bill:         In General, Disputes Became part and parcel of  Day-to-Day Life. Someone or the Other belonging to family or else not a part of the family would be fighting for something. These Disputes may be for Smaller or B

Military exercises of India

List of all Military Exercises of India 2021 Military Exercises of India with Neighbours Sampriti: India & Bangladesh Mitra Shakti: India & Sri Lanka Surya Kiran: India & Nepal Hand in Hand Exercise: India & China Ekuverin: India & Maldives Military Exercises of India with Other countries Maitree Exer

Consumer Protection Rules, 2021

Consumer Protection (Jurisdiction of the District Commission, the State Commission and the National Commission) Rules, 2021 1) Pecuniary Jurisdiction The Consumer Protection Act, 2019 The Consumer Protection Act, 2019 promulgates a three-tier quasi-judicial mechanism for redressal of consumer disputes namely district commissions, state

Swachh Bharat Mission (Urban) 2.0

The Swachh Bharat Mission - Urban (SBM-U), launched on 2nd October 2014 aims at making urban India free from open defecation and achieving 100% scientific management of municipal solid waste in 4,041 statutory towns in the country. The objectives of the mission are mentioned below: Elimination of open defecation Eradication of Manual S

Students Achievement

Search By Date

Newsletter Subscription
SMS Alerts