List of PSU Bonds

1. Fixed-Rate Bonds
2. Floating-Rate Bonds
3. Sovereign Gold Bonds
4. Inflation-Indexed Bonds
5. Zero-Coupon Bonds
6. Bonds with Call and Put option.

Following is the list of some of the PSU bonds issued in India-

• Power Finance Corporation (PFC)
• Nuclear Power Corporation (NPC)
• Rural Electrification Corporation (REC)
• Indian Railways Finance Corporation (IRFC)
• National Highways Authority of India (NHAI)
• Food Corporation of India (FCI)
• Power Grid Corporation of India (PGC)
• Indian Oil Corporation (IOC)
• NHPC Limited
• National Thermal Power Corporation (NTPC)
• India Infrastructure Finance Company (IIFC)
• Housing and Urban Development Corporation (HUDCO)
• Mahanagar Telephone Nigam Limited (MTNL)
• Oil and Natural Gas Corporation (ONGC)
• Bharat Petroleum Corporation Limited (BPCL)
• Gas Authority of India (GAIL)
• Steel Authority of India (SAIL)
• Punjab National Bank (PNB)
• Bank of Baroda (BOB)
• State Bank of India (SBI)
• Export-Import Bank of India (EXIM)
• National Housing Bank (NHB)

Public Sector Undertaking (PSU) Bonds are issued by Government entities or such public companies, whereby the government has the majority ownership in the company.

• These are the debt instruments the government sector companies issued for the medium and long term. The shareholding capacity of the government must be 51% or more in such companies.
• There is a kind of loan agreement between the government and the citizens while issuing such bonds.
• The government here acts as the issuer, and the citizens act as the lender.
• The government agrees to pay a fixed return regularly to the citizen and also promises to repay the principal amount on the bond’s maturity.

• These bonds are of medium to long-term nature. They generally come with a period ranging from 10-15 years.
• The bonds are tradeable at the exchange and can be held easily in a demat account.  
• These bonds are highly liquid. 
• The government issues PSU bonds, and hence they have high credit ratings and are a very safe option for investment. 
• They offer a regular fixed income to the holder.

• High yield- PSU bonds offer higher interest rates as compared to FDs. 
• Guarantee- These bonds offer greater security to the holder as government entities issue them, making it attractive and trustworthy for investors.
• Less risky- These are less risky investments than other available investment options. 
• Low risk of default- Since PSU bonds are issued by government entities. Hence, these bonds have a low risk of default in the interest payment and repayment of the principal amount. 
• Regular income- PSU bonds are fixed-income investment options. They provide a regular income to the holder. 
• Less vulnerable- PSU bonds are less vulnerable to market fluctuations.

• Taxable - Interest on PSU bonds is taxable in the hands of the holder as per their tax slab.
• Fixed Return - These bonds do not consider the market's inflation rates. They offer a fixed, predetermined interest rate; hence, the holder is denied the inflation benefits.
• Financial Stability - Issuer's ability to pay back has an impact on bondholders also, in case of uncertain events, bondholders may have to face the risk.

• High-income taxpayers- PSU Bonds are suitable for high-income taxpayers. PSU bonds are preferred because of taxation reasons. Investors holding PSU bonds for 3 years or more must pay long-term capital gain taxes of @20% with indexation benefits. Otherwise, investors holding PSU bonds for less than 3 years will be liable to pay short-term capital gains tax.
• Risk-averse investors-  Risk-averse investors with low risk-taking capacity will be suitable for investing in PSU bonds as the government backs these bonds.
• Portfolio diversification- Investors preferring to diversify their investment portfolio have a good option to invest in PSU Bonds.
• Long period- PSU bonds investment will be suitable for those investors looking to invest their hard-earned money for a longer time, as these bonds come with a maturity period of 10-15 years.
• Safety- Investors looking for a safe investment option will find investing in PSU bonds a good option. These bonds are issued by government entities so it gives a guarantee to the investors, and also, there is a lesser risk of default.

The formula to calculate the bond yield is to divide the coupon's annual payment by the bond's Face value. 
Bond Yield = Annual Payment of the coupon/ Current market price X 100
Let's understand this by an example:

• The current Market Price is ₹950/-
• The face value of the bond is ₹1000/-
• The coupon rate is 8%.

Step 1: Calculate the Annual Coupon rate
₹ 1000 X 8 %= ₹80
Step 2: Divide the annual coupon rate by the current market price
Bond Yield= 80/950 X 100
Bond Yield = 8.421