Tired Of Low FD Returns? Here’s How Corporate Bonds, G-Secs Can Boost Your Portfolio

High-rated corporate bonds and G-secs provide better returns than FDs. With the RBI reducing the repo rate at its last two MPC meetings, these bonds can be a good alternative to FDs in terms of post-tax returns in a reducing interest rate scenario

Sanjeev Sinha

Updated on: 13 July 2025 1:11 pm

Tired Of Low FD Returns? Here’s How Corporate Bonds, G-Secs Can Boost Your Portfolio Photo: Tired Of Low FD Returns? Here’s How Corporate Bonds, G-Secs Can Boost Your Portfolio

Every Indian household knows the comfort of regular income -- be it from salary, interest income, pension, or rent. In FY 24-25, Indian households allocated over 57 per cent of their savings into bank deposits, according to data from the Reserve Bank of India (RBI). But with the recent cuts in the repo rate, the question arises: where can individuals invest for better post-tax returns?

“This is where fixed income steps in—not just as a fallback, but as a strong pillar of a resilient portfolio. Globally, portfolios allocate around 20–25 per cent to fixed income, yet in India, bonds remain largely unexplored by retail investors, despite being a $2.6-trillion market,” says Vishal Goenka, co-founder, IndiaBonds.com.

Fixed income is not merely about safety. It offers predictability, capital preservation, and timely income—all of which are essential in a country like India, where market volatility can spark immediate market reactions and leave you anxious. Whether you are a retiree seeking monthly income or a young professional looking to reduce portfolio swings, bonds help bring balance to your portfolio.

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And with growing digital access to bonds, investors today are no longer restricted to just fixed deposits (FDs)—they can explore high-rated corporate bonds, tax-saving government securities, and more, all while shaping a more strategic, goal-oriented portfolio.

How Do Direct Bond Investments Compare with Debt Mutual Funds or Bond ETFs?

Most investors are familiar with systematic investment plans (SIPs) and mutual funds. But ask them who they have lent their money to through a debt mutual fund, and you’ll likely get a blank stare.

This is one of the biggest contrasts between direct bonds and bond funds.

“With direct bonds, you are not part of a pool—you know your issuer, your interest rate, your maturity date. You can plan for your child’s education, a house downpayment, or retirement with much more precision. Especially with listed and rated bonds, where yields currently range between 7.50 per cent and 10 per cent across tenors, this can be a powerful way to lock in fixed returns,” says Goenka.

Compare this to debt mutual funds or bond exchange-traded funds (ETFs), which do offer diversification and professional management, but at a cost—expense ratios, exit loads, and market-driven net asset value (NAV) fluctuations.

What’s more, with recent changes to tax rules, the removal of indexation benefits has narrowed the tax advantage of debt mutual funds.