A bond is a debt investment in which an investor loans money to an entity that borrows a fund for a defined period of time at a variable or fixed rate interest.
It is similar to debentures but the key difference is that it is issued by a government institute.
Following are the different types of bonds
1) Corporate Bonds - A corporate bond is a debt security that is issued by a company and sold to the investors.
2) Convertible Bonds- A convertible bond is a debt security that can be converted into a predetermined amount of underlying company’s equity. Convertible bonds are an issue to avoid the negative impression of company’s actions.
3) Callable Bonds- Callable Bonds are also known as “redeemable bonds” as the bonds are redeemed prior to the period of maturity.
4) Term Bonds- A term bonds are the bond that matures and comes due on a single date. A term bond possesses all the features of callable bonds.
5) Government Bonds- Government Bonds are those bonds that are issued by the government to support government spending. These bonds are more secure than corporate bonds.
Following are Some Other Important Bonds
1) Masala Bond
Masala Bonds are the rupee-denominated borrowings by Indian entities in the overseas market. The word “Masala” is given by the IFC (International Finance Corporation) to represent Indian culture and cuisine. First Masala Bond was issued by the IFC (International Finance Corporation) when it raised Rs 1000 crore bond to fund infrastructure projects in India.
Issuers of Masala Bonds
RBI has issued guidelines allowing the following entities to issue rupee-denominated bonds overseas.
Benefits to Investor
Benefits to Indian Companies
Regulator of Masala Bonds
As the Masala bonds are Indian Rupee denominated bonds, it is regulated by the Reserve Bank of India.
2) Green Bonds
A Green Bond is a tax-exempt bond that is issued for investment in green projects or for the development of Brownfield sites.
Brownfield Sites are the sites that are underutilized, have abandoned buildings or underdeveloped.
Issuers of Green Bonds: Green Bonds are issued by following multilateral agencies:
Purpose
Green Bonds are issued to encourage the sustainability and development of Brownfield sites. Specifically, it finances projects aimed at energy efficiency, pollution prevention, sustainable water management, etc.
Regulator of Green Bonds
In India Green Bonds are regulated by SEBI (Securities Exchange Board of India).
3) Junk Bonds
Junk Bonds refer to high yield or non-investment grade bonds. These are named as junk bonds as it involves a high rate of risk in relation to investment bonds. It is a fixed-income instrument that carries a credit rating lower by Moody’s investor services.
Investor demands high yield bonds as it yields a high rate of return which in turn compensation for their investment.
Regulator of Junk Bonds
In India, Junk Bonds are regulated by SEBI (Securities Exchange Board of India).
