Currently, 99% of the quasi-sovereign CPSE bonds are privately placed with a limited pool of institutional investors, denying investment opportunities to retail buyers.
In what could help deepen the corporate bond market with enhanced participation of retail investors, the Centre will likely launch two debt exchange traded funds (ETFs) in this fiscal. The pioneering move will help the CPSEs mobilise a part of their annual borrowings in a cost-efficient manner.
The size of the debt ETFs — one with three-year bonds of eight CPSEs and the other with 10-year bonds of 10 CPSEs — will likely be in the range of Rs 10,000-15,000 crore. Unlike individual bonds floated by firms, these ETFs will be traded in the exchanges and will be a very liquid financial product for investors.
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Currently, 99% of the quasi-sovereign CPSE bonds are privately placed with a limited pool of institutional investors, denying investment opportunities to retail buyers.
The Union Cabinet is expected to give approval for the modalities of the debt CPSE ETFs this week, according to official sources. To make these ETFs affordable and retail-investor-friendly, the minimum investment limit and the ETF unit size will likely be kept lower at Rs 1,000 against Rs 10 lakh in standalone CPSE bonds and Rs 5,000 in debt mutual funds.
Source: Financial Express
