7 Different Types of Fixed Income Investment Instruments in India

1. Public Provident Fund (PPF)

PPF is a long-term investment scheme backed by the Government of India, making it one of the safest fixed income investments.

Tenure: 15 years (with partial withdrawals allowed after the 6th year)

Tenure: 15 years (with partial withdrawals allowed after the 6th year)

2. National Savings Certificate (NSC)

NSC is another government-backed savings instrument aimed at small and medium investors.

Tenure: 5 years

Interest Rate: Fixed and compounded annually (around 6.8% as of recent updates)

3. Fixed Deposits (FDs)

Fixed deposits (FDs) offered by banks and NBFCs provide guaranteed returns over a fixed period.

Tenure: Ranges from 7 days to 10 years

Tenure: Ranges from 7 days to 10 years

4. Bonds

In simple words, bonds are a debt instrument issued by the borrower indicating the amount borrowed from the lender.

Bonds can be issued by various agencies like the Government, State Governments, PSUs, Corporates, etc.

Borrowers issue bonds under schemes like fixed interest rate bonds, variable interest rate bonds, covered bonds, market-linked debentures, etc.

5. Debt Mutual Funds

Debt mutual funds pool money from investors to invest in a diversified portfolio of fixed income securities like government bonds, corporate bonds, and money market instruments.

Types: Liquid funds, ultra-short duration funds, gilt funds, credit risk funds, etc.

Types: Liquid funds, ultra-short duration funds, gilt funds, credit risk funds, etc.

6. Government Bonds & Securities

Government bonds and securities, including G-Secs and Treasury Bills, are considered the safest fixed income investments as they are backed by the Government of India.

Types: Long-term bonds, floating rate bonds, inflation-indexed bonds

Types: Long-term bonds, floating rate bonds, inflation-indexed bonds

7. Money Market Instruments

Money market instruments are short-term debt securities with maturities of up to one year, making them highly liquid investments.

Types: Treasury Bills (T-Bills), Commercial Papers (CPs), Certificates of Deposit (CDs), Call Money

Types: Treasury Bills (T-Bills), Commercial Papers (CPs), Certificates of Deposit (CDs), Call Money

Why Consider Alternative Fixed Income Investments?

While traditional fixed income investments like PPF, NSC, and FDs provide safety, their returns may not always beat inflation. Alternative options like corporate bonds and debt mutual funds offer higher returns while still maintaining a lower risk profile than equities and cryptocurrencies.

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