Corporate Bonds are bonds issued by Corporate organizations to fund their business. They have a fixed tenure. They give a good of interest depending on the company. They are not governed by the Reserve Bank of India and hence provide no security. However they are rated by various Rating Agencies that rate them as per the stability of the company that issues them. The ratings are as follows:

Ratings: A A A, AA, AA+, AA-,A+,A, A-,BBB+ etc are different types of ratings assigned to the bonds. They are in general rated from excellent to poor. A bond issued by the T A T A Group of India can have a good rating.

Risks:

– The rate of interest may fluctuate depending upon the change in government policies.

-They can’t be converted into cash easily as they can’t be sold like shares in secondary markets.

-They are subjected to inflation.

-They are subjected to policy change on Tax Structure.

– They are not governed by RBI and hence they offer no protection if a company issuing them goes bankrupt.

-Investors can’t get loans against them as they are not governed by RBI.

Benefits:

Most corporate bonds coming from good companies with good ratings provide greater rate of interest than bank fixed deposits. But it is essential to see that the bonds are rated in a proper manner.

T A T A Motors, T A T A Steel, L & T have all got their bonds in the market and they are of the highest category. Thus if invested properly and with caution and information, these bonds are a good bet for the future.