Bharat Bond ETF
Bharat Bond ETF is India's first corporate bond ETF, launched by Edelweiss AMC in December 2019 under a Government of India mandate, investing exclusively in bonds of Central Public Sector Enterprises (CPSEs), and structured as a target maturity fund with defined maturity dates, listed on NSE and BSE.
The Bharat Bond ETF programme was conceptualised by the Finance Ministry as a mechanism to diversify the funding sources of CPSEs — government-owned companies under various ministries — while simultaneously providing retail investors with access to high-quality PSU bonds in a transparent, exchange-traded format. Prior to Bharat Bond, retail investors had limited access to individual CPSE bonds, which were primarily placed with institutional investors in private placements.
Edelweiss AMC was selected as the sole AMC through a competitive bidding process to launch and manage Bharat Bond ETFs. The first series (April 2023 and April 2030 maturity) was launched in December 2019, followed by additional series in July 2020 (April 2025 and April 2031) and subsequent tranches. Each series has a fixed maturity date, and the portfolio exclusively holds AAA-rated bonds issued by CPSEs such as NHAI, Power Finance Corporation, REC, NTPC, NABARD, and IRFC. The AAA constraint ensures near-sovereign credit quality with marginal spread over Government Securities.
The target maturity structure is a defining feature. Unlike open-ended dynamic bond funds that actively manage duration, Bharat Bond ETFs hold bonds maturing around their defined date and allow units to mature like a fixed deposit. Investors who hold units until maturity receive returns approximately equal to the portfolio yield-to-maturity at the time of investment, minus fund expenses, providing the predictability of a fixed deposit with the transparency of a listed instrument. The indicative yield at investment entry is published daily by Edelweiss, allowing investors to calculate expected returns.
Bharat Bond ETFs are traded on NSE and BSE at live market prices, providing liquidity for investors who need to exit before maturity. However, the market price may trade at a premium or discount to the NAV depending on supply-demand dynamics, interest rate movements, and the remaining time to maturity. Investors who exit before maturity may therefore receive returns different from the portfolio YTM, introducing mark-to-market risk for short-horizon holders.
For taxation, Bharat Bond ETFs held for more than 24 months (as per post-Budget 2024 rules) are taxed at 12.5% LTCG without indexation. Those held for less are taxed at slab rates. Before the 2023 Budget removed indexation for debt mutual funds, Bharat Bond ETFs were among the most tax-efficient fixed-income instruments for investors in higher tax brackets. The tax change has somewhat diminished their relative appeal versus bank fixed deposits for sub-30% taxpayers.