Cabinet approves Bharat Bond Exchange Traded Fund

On December 4, 2019, the Cabinet approved the launch of Bharat Bond Exchange Traded Fund (BBETF) in order to allow the investors to buy government debts. The fund will allow easy and low-cost access with the smallest amount of Rs 1000.

Highlights

The BBETF at its initial stages will hold basket of bonds that are issued by the public sector undertakings and other government organization bonds. It will have a maturity period of 3 to 10 years and are permitted to be traded on stock exchanges.

Benefits

Apart from bank financing, the BBETF will act as an additional financial source for government organizations. As it will help in increasing investors base, demand for their bonds will increase naturally. It will help to inculcate discipline in CPSE (Central Public Sector Enterprises) and the borrowings in CPSE.

Significance

This step will help in deepening corporate bond market and will increase retail participation. It will provide safety, liquidity and predictable tax efficient returns. Also, as compared to previous bonds, the BBETF is tax efficient. This is because, long term capital gains on bond funds are taxed at 20%.

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