Bond Market SIPs: A New Avenue for Risk-Averse Investors

Strategic Insights -

Suresh Darak, founder of Bondbazaar, talks about the introduction of SIPs (Systematic Investment Plans) in the bond market, which offers a new investment avenue for risk-averse investors. The first step is to invest in treasury bills, which have yields around 5.5%. This is considered better than keeping money in idle savings accounts but not as lucrative as liquid mutual funds.

Key Takeaways:

  • SIPs in the bond market are introduced by RBI (Reserve Bank of India), allowing investments in fixed amounts on specific dates, similar to equity or mutual fund SIPs.
  • The process is the same as in equity or mutual fund SIPs, where the amount is fixed and debited on a particular date, and securities are transferred to the Demat account.
  • Treasury bills, with yields around 5.5%, are available for 91-days, 182-days, or 364 days, making it a better option for risk-averse investors than keeping money in idle savings accounts or current accounts.
  • The tax implications are the same as per the investor's slab rates, and TDS (Tax Deducted at Source) will not be deducted.
  • Suresh Darak recommends that risk-averse investors consider SIPs in the bond market, but liquid debt mutual funds or treasury bills may be a better option for others.
  • The success of SIPs in the bond market is uncertain, but it has the potential to be a game-changer in the future, especially when implemented in long-term government securities and corporate bond markets.

Statistics:

  • Over Rs 60 lakh crore is lying in savings accounts, and Rs 20 lakh crore is lying in current accounts, making it a huge sum that could be invested in more profitable options.
  • Yields on treasury bills are around 5.5%.
  • Unlimited liquidity in the bond market can make it a safe and profitable investment for risk-averse investors.

Sources:

  • [Suresh Darak, Founder, Bondbazaar]
  • [RBI (Reserve Bank of India)]
  • [Bondbazaar]