What are Bonds ? : Comprehensive Guide 2025
What are Bonds : Bonds are among the most reliable investment instruments for those seeking predictable returns, steady income, and relatively lower risk compared to equities. In India, the bond market has seen tremendous growth, especially with the increasing participation of retail investors who wish to diversify their portfolios beyond traditional options like fixed deposits and mutual funds.
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Bonds are issued by governments, corporations, financial institutions, and Non-Banking Financial Companies (NBFCs) to raise funds for business operations, infrastructure projects, and growth. This guide provides a complete understanding of bonds, how they work, their features, and a detailed look at some major Indian issuers such as Keertana Finserv Private Limited, Midland Microfin Limited, Kosamattam Finance Limited, Navi Finserv Limited, Muthoottu Mini Financiers Ltd, and Share India Securities Limited.
Also Read : Benefits of Taking a Personal Loan from NBFCs – Comprehensive Guide 2025
What Are Bonds?
In simple terms, a bond is a debt instrument. When you buy a bond, you are lending money to the issuer (a company, bank, or government). In return, the issuer promises to pay you regular interest, known as the coupon, and return the principal amount on maturity. Bonds come in many types—corporate bonds, government securities, tax-free bonds, non-convertible debentures (NCDs), perpetual bonds, and municipal bonds.
The concept is similar to a loan: the investor acts as the lender, and the issuer is the borrower. Bonds have a fixed maturity date, a predetermined interest rate, and a defined repayment schedule, making them ideal for investors who prefer security and predictability.
In India, bonds can be traded on stock exchanges like NSE and BSE, or held privately until maturity. For investors, bonds represent a steady flow of income, while for issuers, they serve as a critical tool for financing.
How Bonds Work
1. Issuance
When an organization needs capital, it can issue bonds to investors instead of taking a loan from a bank. For example, an NBFC might issue secured NCDs at an annual interest rate of 9% for three years. Investors purchase these bonds, and the NBFC pays interest periodically.
2. Interest (Coupon) Payments
The issuer pays interest to investors at regular intervals—monthly, quarterly, semi-annually, or annually. Some bonds, called cumulative bonds, do not pay periodic interest but accumulate it and pay the total amount on maturity.
3. Redemption
At the end of the tenure, the issuer repays the principal. If the bond is listed, the investor can also sell it on an exchange before maturity, though the price depends on market interest rates and the issuer’s creditworthiness.
4. Credit Ratings
Before investing, bonds are rated by agencies like CRISIL, ICRA, or CARE. Ratings such as AAA, AA, or A indicate the creditworthiness of the issuer. Higher-rated bonds carry lower risk but may offer slightly lower returns, while lower-rated bonds offer higher interest but involve more risk.
5. Tax Implications
Interest income from bonds is taxable as per the investor’s income slab. Long-term capital gains from listed bonds (held for over a year) are taxed at 12.5% without indexation benefit.
Features of Bonds
- Fixed Returns: Bonds provide a stable and predictable income stream through fixed coupon payments.
- Safety: Compared to equities, bonds are safer, particularly those issued by government entities or AAA-rated corporations.
- Liquidity: Listed bonds can be traded in the secondary market before maturity.
- Tenure Flexibility: Bonds come with different maturities—ranging from short-term (1 year) to long-term (10 years or more).
- Security: Some bonds are secured against company assets, which reduces default risk.
- Tax Efficiency: Certain types, like tax-free bonds, offer tax benefits on interest income.
- Diversification: Bonds help balance the volatility of equity investments in an investor’s portfolio.
Stocks or Bonds – Which Is Better in 2025?
The choice between stocks and bonds depends on an investor’s financial goals, risk appetite, and investment horizon.
| Factor | Stocks | Bonds |
|---|---|---|
| Nature | Equity ownership | Debt instrument |
| Returns | Higher, market-linked | Fixed and predictable |
| Risk | High (market volatility) | Moderate to low (credit risk) |
| Income | Dividends (not guaranteed) | Fixed interest (guaranteed) |
| Liquidity | High | Moderate |
| Investment Goal | Growth and wealth creation | Stability and income generation |
In 2025, while stock markets continue to attract aggressive investors, many risk-conscious individuals prefer corporate bonds and NCDs for stability and regular income. Bonds can also serve as a hedge during volatile market conditions.
Major Bond Issuers in India (2025)
1. Keertana Finserv Private Limited
Keertana Finserv is an emerging Non-Banking Financial Company (NBFC) that focuses on microfinance and small-ticket loans for rural and semi-urban borrowers. The company provides personal and business loans to individuals and small enterprises. It issues secured non-convertible debentures (NCDs) for investors seeking attractive returns.
Keertana Finserv’s bonds typically offer coupon rates between 9% and 11%, depending on the tenure and market conditions. These instruments are often secured by receivables, providing an additional layer of protection. The company focuses on responsible lending and compliance with Reserve Bank of India (RBI) norms, which strengthens investor confidence.
2. Midland Microfin Limited
Midland Microfin is a prominent microfinance institution (MFI) registered with the RBI. It primarily serves women entrepreneurs and rural borrowers. The company’s bonds are well-known for their stable coupon structure and strong repayment history.
In its recent bond issues, Midland offered NCDs with yields around 10%, attracting retail investors looking for steady returns. The company’s financial discipline, diversified portfolio, and consistent collections make its bonds a reliable fixed-income option in the microfinance sector. Midland’s commitment to social impact lending also enhances its reputation as a responsible issuer.
3. Kosamattam Finance Limited
Kosamattam Finance, headquartered in Kerala, is one of India’s trusted gold loan NBFCs with decades of experience in retail lending. It is part of the larger Kosamattam Group and has a strong branch presence across South India.
The company regularly issues secured redeemable NCDs to raise capital. These bonds often come with tenures of 18 to 84 months and offer coupon rates between 8.5% and 10.5% depending on the chosen payout option (monthly, annual, or cumulative).
Kosamattam’s NCDs are backed by gold loan receivables, making them comparatively safer among NBFC-issued instruments. The company’s transparent operations, experienced management, and long-standing reputation have made its bond issues popular among conservative investors.
4. Navi Finserv Limited
Navi Finserv is a digital-first financial services company founded by Sachin Bansal (co-founder of Flipkart). It operates under the Navi Group, offering personal loans, home loans, and insurance products through a mobile-based ecosystem.
Navi Finserv’s bond issues reflect the company’s robust technology-driven lending model and focus on retail credit. Its NCDs generally come with coupon rates in the range of 9% to 10.5%, depending on tenure and structure.
As of 2025, Navi Finserv continues to gain market trust due to its strong credit discipline, digital underwriting, and consistent performance in the fintech lending space. It represents the new-generation model of financial innovation combined with solid credit management.
5. Muthoottu Mini Financiers Ltd
Muthoottu Mini Financiers, another Kerala-based NBFC, is part of the well-known Muthoottu Group and has a legacy of over a century in financial services. It specializes in gold loans, small business loans, and microfinance solutions.
The company issues secured and redeemable NCDs, often listed on NSE or BSE, with coupon rates varying from 8.75% to 10.25% depending on the scheme. Muthoottu Mini’s bonds are backed by strong asset quality and gold-backed security, ensuring stability and lower default risk.
Investors trust Muthoottu Mini for its excellent customer service, adherence to regulatory norms, and long-standing reputation in the gold loan industry. Its NCD programs are structured to cater to both retail and institutional investors seeking predictable returns.
6. Share India Securities Limited
Share India Securities is one of India’s fastest-growing financial services and brokerage firms, offering trading, investment, and fintech solutions. The company is listed on NSE and BSE and has expanded into algorithmic trading, mutual fund distribution, and portfolio management.
As a diversified financial entity, Share India may issue corporate bonds or debt instruments to strengthen its working capital base and support expansion. The company’s robust balance sheet, consistent profitability, and regulated business environment make its debt instruments appealing to investors.
Its reputation in the capital markets sector and strong compliance standards contribute to investor trust. While the yields on Share India’s debt instruments are generally competitive, they offer an added advantage of being associated with a listed financial group.
Why Investors Choose Bonds in 2025
- Rising Interest Rates: With India’s moderate inflation and tightening liquidity, bond yields remain attractive.
- Portfolio Diversification: Bonds act as a stabilizer against equity market volatility.
- Regular Income: Monthly or quarterly interest payouts provide a consistent cash flow.
- Safety: Secured bonds from reputable issuers reduce default risk.
- Accessibility: Many NCDs are available online via platforms like NSE/BSE debt segments.
Key Risks in Bond Investing
- Credit Risk: The risk that the issuer may default on interest or principal payments.
- Interest Rate Risk: If rates rise, existing bond prices fall in secondary markets.
- Liquidity Risk: Some bonds may not be easily tradable.
- Reinvestment Risk: If interest rates decline, reinvesting coupon payments may yield lower returns.
- Regulatory Risk: Changes in RBI or SEBI policies can impact NBFC issuers and their bond structures.
What are Bonds – Conclusion
In 2025, bonds continue to be one of the most dependable investment avenues for Indian investors looking for stability and consistent returns. As digital platforms simplify access, even small investors can participate in NCD issues from reputable issuers like Kosamattam Finance, Navi Finserv, and Muthoottu Mini Financiers. Whether you’re a risk-averse investor seeking safety or a balanced investor looking for income diversification, bonds are a crucial component of a smart portfolio.
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While stocks may outperform in bull markets, bonds ensure peace of mind through steady income, lower volatility, and capital protection—making them an indispensable part of a long-term financial strategy.
Disclaimer : This article is for educational and informational purposes only. It does not constitute investment advice or recommendations to buy or sell any securities. Bonds and NCDs carry market and credit risks. Investors should carefully read offer documents and consult with a qualified financial advisor before making investment decisions.
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