Glossary
Bond listings are written in shorthand: YTM, coupon, ISIN, clean price, AT1, SDL, 54EC. Every term below is defined in a sentence or two, in the sense Indian investors actually meet it, from corporate bonds and fixed deposits to the tax and settlement mechanics around them.
A
AAA Rating
The highest credit rating a company can hold, signalling the lowest expected chance of default. AAA issuers borrow at the finest rates, so their bonds pay the least. See AAA bonds.
Accrued Interest
Interest a bond has earned since its last coupon payment but not yet paid out. A buyer pays it to the seller on top of the quoted price, so the seller is compensated for the days held.
Amortising Bond
A bond that repays principal in instalments over its life instead of one lump sum at maturity. Your outstanding exposure to the issuer shrinks each year.
Asset-Backed Security (ABS)
A bond whose payments come from a pool of loans such as vehicle finance or gold loans rather than from the issuer's general revenue. Cash flows depend on borrowers in that pool repaying.
AT1 Bond (Additional Tier 1)
A perpetual bond issued by banks to meet capital rules. It has no maturity date and the regulator can order coupons stopped or the bond written off entirely, as happened at YES Bank in 2020.
B
Basis Point (bps)
One hundredth of a percentage point. A yield moving from 9.00% to 9.25% has risen 25 basis points.
Bond
A tradeable loan. You lend money to a company or government, receive periodic interest (the coupon), and get the face value back at maturity if the issuer stays solvent.
Bond ETF
An exchange-traded fund holding a basket of bonds, bought and sold like a share. It gives diversification and daily liquidity, but you own units rather than a bond with a fixed maturity date and locked-in yield.
Bond Price
What a bond trades for today, quoted as a percentage of face value or in rupees. Prices move opposite to yields: when market interest rates rise, existing bond prices fall.
Bullet Repayment
Principal repaid in a single payment on the maturity date, with only interest paid until then. Most listed corporate bonds are bullet structures.
C
Callable Bond
A bond the issuer may redeem early on set dates, usually after rates fall so it can refinance cheaper. Good for the issuer, awkward for you: your high coupon disappears just when replacements pay less.
Clean Price
The bond price excluding accrued interest. Screens and platforms usually quote clean prices; what you actually pay is the dirty price.
Convexity
How much a bond's duration itself changes as yields move. Positive convexity means prices rise a little more on a rate cut than they fall on an equal rate rise.
Corporate Bond
A bond issued by a company rather than a government. Yields exceed bank fixed deposits because you take the issuer's credit risk with no deposit insurance behind it.
Coupon Rate
The annual interest a bond pays, fixed as a percentage of face value. A ₹1,000 bond with a 9% coupon pays ₹90 a year regardless of what the bond trades for.
Credit Rating
A SEBI-registered agency's opinion on how likely an issuer is to repay on time, running from AAA down to D. See bond ratings explained.
Credit Risk
The risk the issuer misses a coupon or fails to return your principal. It is the main risk a bond carries that a bank fixed deposit under the DICGC limit does not.
Credit Spread
The extra yield a corporate bond pays over a government bond of the same maturity. A widening spread means the market is demanding more compensation for credit risk.
Cumulative FD
A fixed deposit that reinvests interest instead of paying it out, so you receive principal plus compounded interest at maturity. Non-cumulative deposits pay interest monthly or quarterly.
Current Yield
Annual coupon divided by current market price. It ignores any capital gain or loss at maturity, which is why yield to maturity is the more useful comparison.
D
Debenture
In India, a debt instrument issued by a company, which may be secured against assets or unsecured. The offer document states which. In practice the market uses "bond" and "debenture" interchangeably for listed corporate paper.
Deep Discount Bond
A bond issued far below face value that pays no or minimal interest, with the whole return coming from the gap between purchase price and redemption value.
Default
An issuer failing to pay interest or principal on the due date. Rating agencies mark it with a D grade, and recovery for bondholders is then decided through insolvency proceedings.
Demat Account
The electronic account that holds your bonds and shares with NSDL or CDSL. You need one to buy listed bonds. See how to buy bonds in India.
DICGC
The RBI subsidiary that insures bank deposits up to ₹5 lakh per depositor per bank. Bonds carry no equivalent cover, which is a core part of the yield difference.
Dirty Price
The clean price plus accrued interest: the amount actually debited when you buy. The two prices converge on each coupon date, when accrued interest resets to zero.
Duration
A measure of how sensitive a bond's price is to interest rate changes, expressed in years. A duration of 4 implies roughly a 4% price fall if yields rise one percentage point.
E
Ex-Date
The first day a bond trades without the right to the upcoming coupon. Buy on or after the ex-date and the seller keeps that payment.
F
Face Value
The principal amount printed on the bond and repaid at maturity, also called par value. Indian listed bonds commonly carry a face value of ₹1,000 or ₹1,00,000.
Fixed Deposit (FD)
A bank or NBFC deposit paying a fixed rate for a fixed term. Compare with bonds in the bonds vs FD guide.
Floating Rate Bond
A bond whose coupon resets periodically against a benchmark such as the repo rate or a T-bill yield. It protects you when rates rise and pays less when they fall.
Form 15G / 15H
Self-declarations filed with a bank or issuer to stop TDS when your total income falls below the taxable limit. 15H is for senior citizens, 15G for everyone else eligible.
G
G-Sec (Government Security)
A bond issued by the Government of India, carrying sovereign credit and effectively no default risk in rupee terms. Yields are the benchmark every corporate bond is priced against.
Gilt
Another name for a government security, borrowed from UK usage. Gilt funds are mutual funds that hold only G-Secs.
Green Bond
A bond whose proceeds are ring-fenced for environmental projects such as renewable energy or clean transport. The credit risk stays that of the issuer, not of the project.
Guaranteed Bond
A bond where a third party, often a state government, promises to pay if the issuer cannot. The guarantee is only as good as the guarantor and the wording, so read whether it is unconditional and irrevocable.
H
Hybrid Bond
A bond with equity-like features, such as perpetual maturity, deferrable coupons or loss absorption. AT1 bank capital is the most common Indian example.
I
Indexation
Adjusting the purchase price of an asset for inflation before computing capital gains tax. It is no longer available on bonds and other debt investments, so long-term gains are taxed on the raw difference.
Inflation-Indexed Bond
A bond whose principal or coupon is linked to an inflation index, so the real value of your return is preserved when prices rise.
Infrastructure Bond
A long-tenure bond funding roads, power or railways, usually from a PSU such as NHAI, PFC or IRFC. Some older issues carried Section 80CCF tax deduction, which no longer applies to new ones.
Interest Rate Risk
The risk that rising market rates push down the price of a bond you already hold. It only turns into a loss if you sell before maturity.
Investment Grade
Ratings from AAA down to BBB-, the band institutions are generally permitted to hold. Anything below BBB- is speculative or high-yield.
ISIN
The 12-character International Securities Identification Number that uniquely identifies a bond, beginning INE for Indian companies. Two bonds from the same company differ by ISIN.
Issuer
The company or government body borrowing the money. Its financial health is the credit risk you take on. Browse bonds by issuer.
J
Junk Bond
Market slang for a bond rated below BBB-, outside investment grade. It pays a high yield because the chance of default is materially higher, not because it is a bargain.
K
KYC
Know Your Customer: the identity verification (PAN, address proof, bank details) required before you can open a demat account or buy bonds on any platform.
L
Laddering
Splitting money across bonds maturing in different years so cash returns at regular intervals and can be reinvested at prevailing rates. It blunts both reinvestment and interest rate risk.
Liquidity Risk
The risk that a bond trades thinly, so exiting quickly means accepting a discount. Smaller issues and lower-rated paper are the least liquid. See selling bonds before maturity.
Listed Bond
A bond admitted for trading on the NSE or BSE, which brings disclosure requirements and an exit route before maturity. Unlisted bonds offer neither.
Lock-in Period
A window during which an investment cannot be sold or redeemed. 54EC capital gain bonds carry a five-year lock-in.
M
Macaulay Duration
The weighted average time, in years, until you receive a bond's cash flows. It is the base measure from which modified duration is derived.
Masala Bond
A rupee-denominated bond issued outside India. The issuer raises foreign money while the currency risk sits with the overseas investor, not the borrower.
Maturity Date
The date the issuer repays face value along with the final coupon. Browse bonds by maturity year.
Minimum Investment
The smallest amount a platform will let you invest in a bond, often ₹10,000 to ₹1 lakh depending on face value and lot size.
Modified Duration
Macaulay duration adjusted for yield, giving the direct estimate of percentage price change per one percentage point move in rates. This is the number traders actually use.
Municipal Bond
A bond issued by a city or municipal body to fund local infrastructure. The Indian market is small, with issues from Pune, Ahmedabad and Indore among the few.
N
NBFC
A Non-Banking Financial Company: a lender without a banking licence. NBFCs issue most of the high-yield bonds listed in India because they pay more than banks to raise money.
NCD (Non-Convertible Debenture)
A corporate bond that cannot be converted into equity. Secured NCDs are backed by specific assets; unsecured ones rank behind them if the issuer fails.
NRE / NRO Account
Rupee accounts for non-residents. NRE holds foreign earnings and is freely repatriable with tax-free interest; NRO holds Indian income, is taxed, and has repatriation limits. See NRI bond investing.
NSC (National Savings Certificate)
A five-year small savings certificate from the post office with a government-set rate, eligible for Section 80C deduction.
O
Offer Document
The prospectus or information memorandum setting out the issuer's financials, the security offered, the use of proceeds and the risk factors. It is the primary document to read before investing.
P
Perpetual Bond
A bond with no maturity date, paying coupons indefinitely. Your only usual exit is selling it or the issuer exercising a call, which makes it far riskier than the coupon suggests.
Premium and Discount
A bond trading above face value is at a premium (its coupon beats current rates), below face value is at a discount. Either way, redemption is at face value.
Principal
The amount lent to the issuer and repaid at maturity, separate from the interest paid along the way.
PSU Bond
A bond from a public sector undertaking such as REC, PFC, NHAI or IRFC. Implicit government ownership means these usually carry AAA ratings and yield less than private issuers.
Public Issue (NCD IPO)
A bond offered directly to retail investors over a subscription window, rather than privately placed with institutions. You apply through a broker or the exchange platform.
Puttable Bond
A bond you can sell back to the issuer at par on set dates. The put is a floor under your downside, so puttable bonds usually pay a slightly lower coupon.
Q
Quasi-Sovereign Bond
A bond from an entity majority-owned by the government, where repayment is widely assumed to be backed by the state without an explicit guarantee. Check whether a guarantee actually exists.
R
Rating Agency
A SEBI-registered firm that grades issuer creditworthiness. CRISIL, ICRA, CARE and India Ratings assign most grades on listed Indian bonds, and ratings from different agencies on the same issuer can differ.
Record Date
The cut-off date deciding who receives the next coupon. Own the bond on the record date and the payment is yours, whatever happens afterwards.
Redemption
The issuer repaying face value and closing out the bond, either at maturity or early if a call option is exercised.
Reinvestment Risk
The risk that coupons or matured principal have to be redeployed at lower rates than the original bond paid. Laddering maturities is the usual defence.
Repatriation
Moving money out of India to a foreign account. NRE balances are freely repatriable; NRO repatriation is capped at USD 1 million a year with tax certification.
Repo Rate
The rate at which the RBI lends to banks, and the anchor for every other rate in the economy. When the repo rate rises, bond yields generally rise and existing bond prices fall.
RFQ Platform
The Request for Quote platform on NSE and BSE, where a buyer or seller asks dealers for firm quotes on a specific ISIN instead of waiting for a match in the open order book. It usually prices a large or illiquid lot better. See selling bonds before maturity.
S
SDL (State Development Loan)
A bond issued by an Indian state government. It carries state rather than central credit and typically yields a little more than a comparable G-Sec.
SEBI
The Securities and Exchange Board of India: the regulator for listed bonds, exchanges, brokers and rating agencies. Banks and deposits are RBI territory.
Secured Bond
A bond backed by a specific charge on the issuer's assets, so bondholders have a claim on that collateral in a default. Unsecured bondholders queue behind them.
Senior Secured
The top of the repayment queue: secured by assets and ranked ahead of other debt if the issuer is wound up. The safest structure at any given credit rating.
Settlement (T+1)
The day the bond reaches your demat account and money leaves your bank, one working day after the trade in the Indian market.
Sovereign Gold Bond (SGB)
An RBI-issued bond tracking the gold price and paying 2.5% interest a year on top. No new tranches have been issued since early 2024, so existing SGBs are bought on the exchange rather than from the RBI.
Sovereign Rating (SOV)
The grade applied to Government of India paper, sitting above AAA because a government can tax and print in its own currency. See SOV bonds.
Subordinated Debt
Debt ranked below senior bonds in a wind-up, so it is repaid only after senior lenders are made whole. Tier 2 bank bonds are the common example.
Sweep-in FD
A savings account linked to a deposit, so balances above a threshold move into an FD automatically and break back when you need the cash.
T
Tax-Free Bond
A bond, mostly issued by PSUs between 2012 and 2016, whose coupon is exempt from income tax under Section 10(15)(iv)(h). None are being issued now, so they trade only on the secondary market. See tax on bonds in India.
TDS
Tax Deducted at Source: tax the payer withholds before crediting interest to you. Listed bonds in demat form lost their TDS exemption on 1 April 2023, so issuers now deduct 10% above the annual threshold. See tax on bonds in India.
Tenure
The time remaining until a bond matures. Longer tenure means more interest rate sensitivity and a longer commitment of your money.
Tier 2 Bond
Subordinated bank capital with a fixed maturity, usually ten years with a call at five. Safer than AT1 because coupons cannot be skipped at will, but still behind depositors.
Treasury Bill (T-Bill)
A short-term government security of 91, 182 or 364 days, issued at a discount and redeemed at face value with no coupon. T-bill yields set the short end of the curve.
Trustee
The debenture trustee appointed to hold security on behalf of bondholders and act if the issuer defaults. Its name and track record are in the offer document.
U
Unsecured Bond
A bond with no specific collateral behind it, repaid from the issuer's general assets and ranked behind secured lenders in a default. It should pay more than a secured bond from the same issuer.
V
Vanilla Bond
A plain bond with a fixed coupon, a fixed maturity and no call, put or conversion feature. Everything else is priced against how far it departs from this baseline.
W
Withholding Tax
Tax deducted before interest reaches a non-resident investor, commonly 20% on Indian bond interest before treaty relief. A tax residency certificate can reduce it.
X
XIRR
The annualised return on a series of cash flows arriving at irregular dates. It is the correct measure when you invest in tranches or receive coupons at uneven intervals.
Y
Yield Curve
A plot of yields against maturity for the same class of issuer. It normally slopes up; a flat or inverted curve suggests the market expects rate cuts or a slowdown.
Yield to Call (YTC)
The annualised return if a callable bond is redeemed at its first call date instead of maturity. On a bond trading above par, YTC is the more realistic number.
Yield to Maturity (YTM)
The annualised return if you buy at today's price and hold to maturity, with coupons reinvested at the same rate. It is the single number to compare bonds on, and what RightBonds sorts by.
Z
Zero-Coupon Bond
A bond paying no periodic interest, issued below face value and redeemed at face value. The whole return is the price gap, so there is no reinvestment risk.
#
10-Year G-Sec Yield
The benchmark yield on the most traded ten-year government bond, and the reference point against which every corporate bond spread in India is measured.
54EC Bonds
Capital gain bonds from PSU issuers such as REC and PFC. Investing long-term capital gains from property within six months exempts them under Section 54EC, capped at ₹50 lakh with a five-year lock-in and an interest rate well below the corporate bond market. The interest itself is fully taxable, as covered in tax on bonds in India.
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