Why bonds could be the next big move for Indian retail investors

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Indian bond yields are no longer depressed the way they were a couple of years ago. The 10-year government security has been hovering a little above 6.5 percent in November 2025, creating a solid base level for rupee debt returns. At the same time, the Reserve Bank of India has resumed buying government bonds after a six-month pause, injecting liquidity and helping keep yields in a tight, predictable band. For investors who are tired of sharp swings in equities and underwhelmed by big-bank fixed deposits, this combination of reasonable yields and central bank support is making high-quality bonds look far more attractive than before.

Why bonds now compete seriously with FDs

The most striking shift is in relative returns. RBI floating rate savings bonds currently offer about 8.05 percent, resetting every six months at the National Savings Certificate rate plus 35 basis points. That is roughly 100–200 basis points higher than five to ten-year fixed deposits at large banks such as State Bank of India, where comparable FDs are closer to 6.05 percent, and still comfortably above the 10-year G-sec yield. On the corporate side, many AAA-rated and high-grade bonds continue to offer yields that beat top-bank FDs, while still carrying investment-grade ratings from agencies such as CRISIL and ICRA. For conservative investors, that means the possibility of FD-plus returns with better transparency on pricing and the option to trade in the secondary market if liquidity allows.

Reforms that are opening the bond market to small investors

Historically, the corporate bond market in India was dominated by institutions because minimum ticket sizes were high and public issues were limited. That is changing. In 2025, SEBI proposed a set of reforms specifically aimed at boosting retail participation in public debt issues. These include allowing issuers to offer slightly higher coupons or small price discounts for certain categories such as senior citizens, women, armed forces personnel and regular retail investors. SEBI has also backed a broader push to reduce minimum investment in many privately placed bonds from ten lakh rupees to as low as ten thousand rupees and to streamline digital processes and disclosures. Together with the RBI’s retail direct platform and a host of new online bond marketplaces, this means bonds are no longer a product only for high-net-worth investors or institutions.

How bonds can improve a normal investor’s portfolio

For most households, bonds are primarily about stability and income. Government bonds and RBI floating rate bonds come with a sovereign guarantee and therefore extremely low default risk, which makes them an obvious anchor for the fixed-income part of a portfolio. Corporate bonds and high-quality non-bank issuers add an extra layer of yield in exchange for carefully measured credit risk. When blended with equities and, if suitable, products like NPS and EPF, bonds help smooth overall returns and reduce the chance that a bad year in the stock market derails long-term financial goals. In an environment where inflation is moderate and interest rates are expected to be broadly sideways, locking into decent yields for three to ten years can be a very rational move.

What to watch carefully before jumping in

Bonds still require homework. Interest rate risk matters if you plan to sell before maturity: rising rates push prices down. Credit risk matters if you chase unusually high yields from weaker issuers. Liquidity can be patchy in some individual issues. The safest way for most small investors is to focus first on sovereign and top-rated bonds, match maturities to their goals, and use reputable platforms rather than obscure over-the-counter offerings. Used intelligently, bonds will not replace equities or traditional savings, but they can become the quiet workhorse of your portfolio: steadily compounding, cushioning volatility and giving you more predictable cash flows.

FAQs

Q. Are bonds safer than fixed deposits for a small investor in India?

Fixed deposits at scheduled banks are simpler, come with deposit insurance up to the current limit and do not fluctuate in value, which makes them feel safer day to day. High-quality government and AAA-rated bonds, however, are comparable in credit safety and can offer higher yields, with the added benefit that you can sometimes exit in the secondary market. The real risk difference comes from the type of issuer you choose, not the label of FD versus bond.

Q. If RBI floating rate bonds are so attractive, should I put all my debt money there?

RBI floating rate bonds are a strong option for conservative investors because they carry a sovereign guarantee and adjust their coupon with the National Savings Certificate rate. However, they have a long lock-in, limited liquidity and interest is fully taxed at slab rates. It is usually better to treat them as one pillar of your debt allocation alongside other instruments such as high-quality bonds, short-term debt funds and provident fund contributions, rather than your only fixed-income holding.

Q. How should a beginner start investing in bonds?

A beginner can start by allocating a modest share of their portfolio to very safe options such as RBI floating rate bonds or government securities accessed through RBI’s retail direct platform or trusted online brokers. Once comfortable with how pricing and interest payments work, they can gradually add selected AAA or high-grade corporate bonds, keeping maturities aligned to their goals and avoiding anything they do not fully understand.