India’s financial landscape has undergone significant transformation in recent years, with equity investing gaining immense popularity. However, conservative retail investors, wary of the volatility of stocks, have traditionally favoured safer options like bank fixed deposits (FDs), Public Provident Fund (PPF) or small savings schemes. These avenues, while secure, often yield modest returns. Meanwhile, India’s bond market, valued at approximately Rs238 lakh crore as of March 31, 2025, has largely been the domain of corporations and large institutions. For retail investors, the bond market has historically seemed complex and inaccessible. However, recent developments are reshaping this narrative, making bonds an increasingly viable option for individual investors seeking stable returns.
The shift began with concerted efforts to raise awareness about debt instruments. Mutual funds have played a role in promoting debt funds, which pool investments into bonds and other fixed-income securities. More significantly, the Reserve Bank of India has taken bold steps to democratise bond investing through its RBI Retail Direct platform, launched to enable retail investors to directly purchase government securities. This initiative has lowered entry barriers, with minimum investments as low as Rs1,000. Additionally, the emergence of SEBI-registered bond platforms like Jiraaf, Indiabonds and Bondbazaar has simplified the process of buying and selling bonds, mirroring the ease of stock trading apps. These platforms provide user-friendly interfaces, detailed insights, and access to a range of bonds, making them attractive to retail investors.
Bonds come in various forms, each with distinct characteristics. Government securities, issued by the Central or state governments, are considered low-risk due to their sovereign backing. As of March 31, 2025, the Central government has Rs108 lakh crore in outstanding government securities, while state development loans account for Rs63.15 lakh crore. Corporate bonds, issued by companies to raise debt, carry slightly higher risk but offer potentially higher returns. Investors essentially lend money to the issuer, receiving fixed interest payments, known as coupon rates, typically paid annually or semi-annually. The corporate bond market, valued at Rs53.64 lakh crore, constitutes about 22.5 per cent of India’s total bond market.
Bonds vary not only by issuer but also by maturity and credit rating. Maturities can range from a few months to several decades, allowing investors to align investments with their financial goals. Credit ratings, such as AAA for top-rated bonds, indicate the issuer’s creditworthiness. Higher-rated bonds are safer but offer lower coupon rates, while lower-rated bonds may provide higher yields to compensate for increased risk. For those overwhelmed by these choices, debt mutual funds offer a simpler alternative, managed by professionals who select and diversify bond investments. Alternatively, SEBI-regulated platforms provide tools to help investors understand and select bonds tailored to their risk appetite and financial objectives.
Saurav Ghosh, co-founder of Jiraaf, highlighted the growing appeal of bonds: “Investors are beginning to see bonds not just as an institutional product but as a practical wealth-building tool for individuals. The RBI’s move to lower the minimum investment to Rs1,000 has made bond investing far more accessible.” He notes steady adoption across metropolitan and tier-II cities, driven by investors seeking predictable returns and better post-tax yields than FDs. For instance, platforms like Jiraaf allow investments starting at Rs1,000 for corporate bonds. Bondbazaar allows investment in government securities at just Rs100.
The allure of bonds has grown in 2025, particularly as the RBI has reduced its policy repo rate by 100 basis points (1 per cent), prompting banks to lower FD rates to around 6.0–6.5 per cent. In contrast, bonds offer returns of 9.5–10 per cent, according to Suresh Darak, founder of Bondbazaar. “Earlier, if FD rates were 7–8 per cent, bonds offered 2–3 per cent higher returns. Now, the gap has widened, making bonds more attractive,” he said. This shift is particularly relevant as equity markets have underperformed in 2025 compared to the robust returns of the previous four years. Bonds, with their lower volatility and predictable income, provide a compelling alternative for risk-averse investors.
“People made good money in bonds over the last two years. The more they understand bonds, the more they invest,” said Darak. Unlike equities, bonds offer defined maturities and lower risk, making them an ideal middle ground. “Bonds provide predictable income with lower volatility, unlike the uncertainty of equities,” said Ghosh. This stability is particularly appealing for conservative investors looking to diversify their portfolios beyond traditional FDs and savings schemes.
Investing in bonds, however, requires careful consideration. Not all bonds are equal, and selecting the right ones involves assessing maturities and credit ratings. Darak advises diversification to mitigate risk: “If you have Rs10 lakh to invest, spread it across bonds from ten different companies. Choose durations based on bond quality—three to five years for AA-rated bonds, but 12 to 15 months for lower-rated ones.” This approach balances risk and reward, ensuring a well-rounded portfolio. Additionally, experts recommend bond laddering, a strategy where investors buy bonds with staggered maturities. For example, a portfolio might include bonds maturing in one to five years. As the one-year bond matures, the principal is reinvested in a new five-year bond, maintaining a cycle of liquidity and returns.
Despite the growing accessibility, the bond market remains complex for many retail investors. Unlike institutions with dedicated credit and operations teams, individual investors often lack the expertise to assess risks or navigate market conditions. SEBI-registered platforms address this gap by simplifying bond discovery and purchase processes, offering insights into credit ratings, yields and market trends. However, Darak pointed out the challenges: “For institutions, it is easy—they have teams to assess risk and execute orders. For retail investors, it is a different ball game.” Education and guidance are crucial to help investors make informed decisions.
India’s bond market, while vast, sees limited retail participation, estimated at just 0.1 per cent of the total market. Yet, the potential for growth is significant. Darak predicts that online bond platforms could see portfolio growth of 50–100 per cent over the next five years as awareness and adoption increase. Ghosh shares this optimism, anticipating that bonds will become a mainstream asset class for Indian households. The combination of RBI’s initiatives, declining FD rates, and the rise of digital platforms is creating a fertile ground for retail bond investing.
For conservative investors, bonds offer a compelling alternative to traditional savings instruments. With yields outpacing FDs and lower risk than equities, they provide a balanced option for wealth creation. Platforms like Jiraaf and Bondbazaar are making it easy to enter this market, while strategies like diversification and bond laddering help manage risks. As India’s bond market continues to evolve, retail investors have the opportunity to participate in a once-exclusive domain, building wealth with greater confidence and predictability.