Best Monthly Interest Paying Bonds for NRIs

Non-Resident Indians (NRIs) often look for safe and reliable investment options that provide a steady stream of income, especially in the form of monthly interest payments. Bonds can be an attractive investment choice for NRIs as they offer a predictable income stream while preserving capital. In this blog post, we will explore some of the best monthly interest paying bonds for NRI, helping you make informed investment decisions.

What are Bonds? 

Bonds are debt securities or financial instruments representing a loan made by an investor to a borrower. When you invest in a bond, you are essentially lending money to the issuer, which can be a government, municipality, corporation, or other entity. In return for your investment, the issuer agrees to pay you periodic interest payments, typically at fixed intervals, and return the principal amount at the end of the bond’s term, known as its maturity date.

What are Monthly Interest Paying Bonds for NRI?

Monthly Interest Paying Bonds for NRIs are various bonds where NRIs can invest to seek a regular and predictable income stream in the form of monthly interest payments. Apart from the monthly payout, there are also different periodical interest paying bonds like quarterly interest paying bonds for NRIs and more.

Can NRIs invest in Bonds? 

Yes, NRIs can invest in various NRI bonds under “Fully Accessible Route” which was created by RBI. With this, NRIs can now invest in various Indian government bonds. To invest in bonds as an NRI, one must utilize the “NRI Window” which gets enabled while the issuing of the bonds by the issuer. The rules and regulations for investing are the same for NRIs and OCIs (Overseas Citizen of India). In the next segment let’s take a look at the types of bonds NRIs can invest in.

Also read: NRI Investment in Bonds: The Ultimate Guide 2023

List of Quarterly & Monthly Interest Paying Bonds for NRI

What are the types of bonds where NRIs can Invest? 

• Public Sector Unit (PSU) and Capital Bonds
• Secure Corporate Bonds and Non-Convertible Debentures (NCDs)
• Government Tax-free NRI Bonds
• Treasury Bonds – Guaranteed Returns
• Municipal and Zero Coupon Bonds
• Infrastructure Bonds
• Bonds issued by National Highways Authority of India (NHAI), Rural Electrification Corporation (REC), Power Finance Corporation (PFC) etc.

Note: ICRA and CARE are credit rating agencies that rate these bonds based on the ability of the issuer to pay back the debt on time. The higher the credit rating, lower the chance of the issuer defaulting on the payments.

Taxation on Sale of Bonds on Stock Exchange

Holding Period for Long-Term Capital Gains: 12 months

Note: For NRI investors, the relevant tax applicable is deducted as TDS (Tax Deducted at Source) and the post-tax value is credited to the specified bank account. Also, the gains made from trading of all types of bonds on stock exchanges do not carry any indexation benefit.

Wrapping Up

Investing in bonds and fixed-income securities is a prudent choice for NRIs looking for monthly interest payments. It’s essential to consider factors such as safety, returns, and repatriability while choosing the right investment option. Diversifying your portfolio with a combination of government and corporate bonds, along with fixed deposits and savings schemes, can help you build a balanced and secure investment strategy that suits your financial goals and risk tolerance.

Start your NRI Investing Journey with SBNRI

NRIs can now download the SBNRI App and choose to invest in different investment options for NRI schemes in India with ease. You can also get detailed investment advice from experts at SBNRI. Also, visit our blog and YouTube channel for more details.

SBNRI is an authorized Mutual Fund Distributor platform & registered with the Association of Mutual Funds in India (AMFI). ARN No. 246671. NRIs willing to invest in mutual funds in India can download the SBNRI App to choose from 2,000+ mutual fund schemes or can connect with the SBNRI wealth team to better understand Mutual Fund investments.

FAQs

What is the difference between NCD and bond?

• Bonds are backed by the asset of the issuer whereas debentures are not secured by any of the physical assets or collateral. Debentures are issued and purchased only on the creditworthiness and reputation of the issuing party. The interest rate of bonds is generally lower than debentures.

What are NRI bonds?

• The Reserve Bank of India issues government securities in the form of bonds to non-resident Indians (NRIs) who want to invest their money in India. NRIs can invest in government securities through a separate route i.e. the ‘Fully Accessible Route’ introduced by the RBI.

What are the bonds that NRIs can purchase?

• From FY 20-21, NRIs are allowed to invest in following bonds:
  • PSU and capital bonds
  • NCDs (Non-convertible debentures)
  • Debt mutual funds
  • Bharat bond ETF and EOF

What are the guidelines for NRIs to invest in bonds?

• Key conditions are listed below:
  • NRIs/ OCIs can invest in shares/ debentures through stock exchange house and a designated branch authorized by the RBI.
  • The Reserve Bank of India gives NRIs general permission to invest on non-repatriable basis for 5 years. After that the authorized dealer can renew the permission. 
  • NRI investment in equity and convertible debentures of any listed company should not be in excess of 5% of the total paid-up value of each convertible debenture series issued by the company.