INSUBCONTINENT EXCLUSIVE:
Mumbai: Many non-resident Indians (NRIs) are lapping up Bharat Bond Exchange Traded Fund (ETF) as restrictions on investing in various other
debt products for them have left fewer options other than fixed deposits
Analysts said safety of the instrument, low cost and better returns than debt products back home too are prompting NRIs to try out the
Dalal points out that he is seeing substantial interest from NRI families visting India from London, Singapore and Dubai.
Analysts believe
there are chances of capital appreciation given that tax-free bonds from government companies trade in the range of 5.7-5.8 per cent
With the 10-year Bharat Bond ETF giving a yield of 7.58 per cent and assuming an inflation of 4 per cent, the post-tax return could be 7 per
This arbitrage between the two leaves scope for capital appreciation once it is listed
Jasani suggests that NRO funds should be invested in the ETF as interest rates are lower here and there is no favourable tax treatment for
On the other hand, interest income from NRE funds on a bank deposit is tax-free, and hence less alluring.
Another reason for NRIs to buy
into this bond is that there are not many choices in the debt space for them in India
For example, they are not allowed to invest in highyielding public issues of nonconvertible debentures in the recent past like those of L-T
Finance and Tata Capital, which were offered at 8.5-9 per cent
They are also not allowed to invest in perpetual bonds that offer up to 10 per cent and public provident fund which returns as high as 7.9
per cent.
Wealth managers believe this product also addresses the issue of credit risk which Indian investors have been worried about ever
Wealth Management.
Some US-based investors could stay away due to the rigorous tax reporting norms in their country.