The launch of the first corporate Exchange Traded Fund (ETF) bond, namely, Bharat Bond was approved by the Union Cabinet on Wednesday. The exchange traded funds are used to invest in a basket of securities. These investments can be in the form of an index, security or commodity. The investments can be later used to trade on the stock exchange like any listed security.
Finance Minister Nirmala Sitharaman while addressing a press conference after the Cabinet meeting said that "Bharat Bond ETF will be the first corporate bond ETF in the country”. "It will provide additional money for Central Public Sector Units (CPSUs), Central Public Sector Enterprises (CPSEs) and other government organisations," she said.
During the launch of the Bharat Bond, the cabinet ministers also informed that these bonds are supposed to have two maturity series -- 3 years and 10 years. The move has been flagged off as a part of the government's efforts to enhance depth in the bond market and draw retail investors to the debt products. The proposal was first announced by late Arun Jaitley in his Budget 2018-19 speech. Highlighting the possibilities of the returns after investing in these bonds, it comes to light that the Securities and Exchange Board of India (SEBI) does not allow any bonds or the mutual funds to guarantee returns. However, as per the media reports and industry veterans, a scheme that comes with a defined maturity does give an indication of a positive return.
The Finance Minister before announcing the Bharat Bonds on Wednesday engaged in a heated debate in the parliament with the opposition on Monday. Underlining the number of people who have been availing the government's scheme, Nirmala Sitharaman said that “The 8-crore people who received LPG connections under the Ujjwala scheme, is that made up? Under the Ayushman Bharat scheme, who are the 68 lakh beneficiaries? Is it a brother of ours? 68 lakh people today are availing medical facilities worth 5 lakh rupees, who are they? Also, 8.8 crore farmers get PM Kisan Samman Nidhi. Who are they? Are they someone's brother or son-in-law or brother-in-law (Jijaa Ji)? 11 crore people have got toilets in their homes now, who are they? Are they someone’s brother-in-law? Is it constructed in brother-in-law's home? No!"