How to Buy and Sell Bonds in India?

Last Updated: 29 Aug 2025

If you are looking for a safe and steady way to grow your money, bonds can be a good choice. They are seen as more stable than shares and can offer regular income. In India, many investors are now exploring how to buy bonds to add stability to their investment portfolios. Bonds can be purchased through different platforms, from banks to online trading accounts, and are issued by the government as well as private companies. This blog will cover how you can buy and sell bonds in India, along with the key points you should know before investing.

What are Bonds?

Bonds are an ideal investment avenue for investors with the objective of capital protection and periodic income. Bonds include treasury bills, government securities, and corporate bonds. In India, the bond market is not as developed as the equity market. How to purchase and sell bonds varies based on the issuer and investor type.

Why Invest in Bonds?

Many people are eager to know how to invest in bonds. But before we get into that, let’s discuss why investing in them is a good idea.

• Steady income: Bonds often pay regular interest, which can provide a stable cash flow.
• Lower risk: They are generally less risky than shares, especially government bonds.
• Capital protection: You usually get back your invested amount at maturity.
• Diversification: Adding bonds to your portfolio can balance the risk from other investments.
• Variety of choices: You can invest in government bonds, corporate bonds, or municipal bonds based on your goals.
• Better returns than savings accounts: Many bonds offer higher interest than a regular bank savings account.

How To Buy & Sell Bonds?

Institutional investors such as mutual fund houses, insurance companies, and trusts are big players in bond securities. In contrast, the market share of retail investors, NRIs, and HNIs investing in bonds are relatively small.

How to buy bonds

Check out how to purchase bonds in India:

Government Securities and Treasury Bills

Reserve Bank of India, State and Central Governments, Municipal Boards, and Local Authorities issue government bonds and treasury bills. How to buy and sell bonds differs for retail and institutional investors.

1. Institutional Investors – Government securities are auctioned through a competitive bidding process. Typically, the bid rate is higher than the face value. Hence, bond yield is lower than the interest rate.For example, the government offers bonds with a face value of Rs. 100 and an interest rate of 6% per annum. Through the auction, investors place bids for the bond. The issuer decides a cut-off rate based on the bids received. Let’s suppose the cut-off rate is Rs. 140. The issuer will allocate securities to investors with a quote more than or equal to Rs. 140. The effective yield is 4.28% (6%/140*100).
2. Retail Investors – In November 2017, the government introduced a non-competitive bidding facility. You require a mobile or web app of NSE called “NSE goBID’’. An investor must register online on the app.To purchase bonds, you must carry out the following steps:
   • Login to your account with a unique username and password.
   • The dashboard tab details the current, past, and forthcoming issues. Details such as bidding dates, issue size, price per security, and bid value range are available.
   • Select the issue and place a bid by entering the investment value and price per security.
   • Make the payment online. You may also view details for active, cancelled, and rejected bids.

Corporate Bonds and Deposit

You can purchase corporate bonds or deposits through a broker, banker, or bond trader in the primary market. You may also buy some bonds over the counter. The intermediary provides face value, coupon rate, credit rating, tenor, allotment, and redemption dates for efficient decision-making.

How to sell bonds

An investor may not necessarily hold a bond for its entire tenure. He can sell it in the secondary market to another buyer.

Unlike the equity market, the trading volume of the secondary market for bonds is much lower. Thus, the liquidity in the bond markets is comparatively lesser. Most bond investors purchase securities intending to hold for the entire tenure.

Documents Required for Bond Trading

Anyone interested in knowing how to sell bonds should realise that they have to present a few documents. Check out the documents required:

• PAN card – Needed for tax purposes and identity verification.
• Aadhaar card – For proof of identity and address.
• Bank account details – To link your investments and receive interest payments.
• Demat account details – Most bonds are held in electronic form, so a Demat account is required.
• Passport-sized photographs – For application and KYC records.

You will also need to complete the Know Your Customer (KYC) process with your broker or bank before you can buy or sell bonds.

Bond Investment Strategies

For any investment avenue, the ideal strategy is a factor of your investment goal, risk appetite, and time frame. Bond investment strategies include a vanilla buy-and-hold approach or complex trades involving interest rates and inflation. Investment goals include capital protection, regular income, tax liabilities, and risk management.

High-net-worth individuals may prefer to buy bonds and lock in the capital for the entire bond tenure even with low yields. The objective for such investors is capital protection. For a retired investor, recurring revenue is essential and may choose to invest in bonds.

In India, the government issues tax-free bonds. The yield of these bonds is lower, but the income earned is exempted from tax. For investors in the maximum tax bracket, tax-free bonds are an exciting avenue for investment.

Similarly, investors with a lower risk appetite prefer government-backed securities. Corporate bonds and fixed deposits are relatively risky. The credit rating allocated for such corporate bonds is commensurate with the risk involved.

How to Select the Best Broker for Bond Trading?

Choosing a reputable and reliable bond broker is a crucial step in bond trading. Keep the following points in mind when selecting the right broker.

• Trading History – A longer operational track record generally indicates a safer choice. Ideally, the broker should have at least two years of experience.
• Customer Base – A broker with a wide market reach is usually more dependable than one that has just entered the market.
• Turnaround Time – Fund deposits and withdrawals should typically be completed within two to three days. The transfer process should be smooth and without unnecessary delays.
• Transparency – Clear communication and openness are vital. The broker should provide timely reports and all necessary disclosures.

Other aspects to consider include regulatory compliance, global presence, and the range of services offered. In India, the bond broking space is still developing, with only a few prominent names. IIFL Capital Services Limited stands out as an excellent choice to start your bond trading journey. Simply visit the IIFL website or download the IIFL Markets app to begin.

Bottom Line

In India, government bonds give an average return of 7% per year in the long term. Equity investments can give returns of over 15% in five years, which is why many people prefer equity. However, in the last ten years, more retail investors have started buying bonds to diversify their portfolios. They use government securities and T-Bills to manage risk.

Frequently Asked Questions

Q1. Can I invest 1000 rs in bonds?

Yes, you can invest ₹1,000 in bonds, especially in government schemes with low entry requirements. Learn more about how to buy bonds in India for detailed guidance.

Q2. Can I buy bonds directly in India?

Yes, bonds can be purchased directly through RBI’s Retail Direct platform or stock exchanges. Understand how to trade bonds in India for seamless transactions.

Q3. What is the interest rate on a 5 year bond?

The interest rate on a 5-year bond depends on the issuer and market conditions. Research how to buy bonds in India to compare available options.