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What are Covered Bonds?

by Ayushchandak
Covered Bonds

Covered bonds are a type of debt instrument that is typically issued by banks and backed by a pool of assets. In India, covered bond are regulated by the Reserve Bank of India (RBI) and can be issued by both scheduled commercial banks and housing finance companies.

So, if you’re looking to buy covered bond in India, where should you go? Read on to find out!

What are Covered Bonds?

A covered bond is a type of debt security that is backed by a pool of assets. These assets are typically used to secure mortgages or other loans. In the event that the borrower defaults on their loan, the lender can look to the covered bond for repayment.

Covered bonds have been around for centuries, with the first ones being issued in Prussia in 1769. Since then, they have become a popular financing tool for banks and other financial institutions.

In India, covered bond were first introduced in 2012. The Reserve Bank of India (RBI) regulates the issuance and purchase of covered bond in the country. Currently, there are only a handful of banks that issue covered bond in India.

If you’re looking to invest in covered bonds, here are a few things to keep in mind:

  • Covered bond are typically issued by banks and other financial institutions. Make sure to research the issuer before investing.
  • Covered bond are long-term investments. They typically have maturities of 5 to 10 years.
  • Covered bond typically offer higher interest rates than other types of debt securities, such as government bonds.

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