The Unexplored World of Debt-linked Investment Instruments

By Ninie Verma, Content Associate, 1stCheque by Favcy


  • Did you know that the average low-risk debt investments give institutional investors a solid 10-16% fixed return as ARR?!
  • Yet, the world of investable grade bonds and government securities is explored by only select investors.


All About Debt Linked Instruments

Debt-linked investment instruments are a great investment option for individuals who are looking to grow their wealth while minimizing their risk exposure. These funds invest in fixed income securities such as bonds, government securities, and other debt instruments, which offer relatively stable returns compared to equity-oriented investments.

A debt instrument is a fixed income asset that allows the lender (or giver) to earn a fixed interest on it besides getting the principal back while the issuer (or taker) can use it to raise funds at a cost. Debt acts as a legal obligation on the issuer (or taker) part to repay the borrowed sum along with interest to the lender on a timely basis. A debt instrument can be in paper or electronic form. Bonds, debentures, leases, certificates, bills of exchange and promissory notes are examples of debt instruments.

1. Debentures
Debentures are not backed by any security. They are issued by the company to raise medium and long term funds. They form the part of the capital structure of the company, reflect on the balance sheet but are not clubbed with the share capital.


2. Bonds

Bonds on the other hands are issued generally by the government, central bank or large companies are backed by a security. Bonds also ensure payment of fixed interest rates to the lenders of the money. On maturity of the bond, the principal amount is paid back. Bonds essentially work the way loans do.

3.Treasury Bills
Treasury bills are short-term debt instruments that mature within a year. They can be redeemed only at maturity. They are sold at a discount if sold before maturity.

Low-risk and high-returns sounds like a good package. What is keeping investors away?


⏩Lack of knowledge - not every investor is aware of these asset classes

⏩Limited accessibility - most bonds are unlisted and away from the public eye

⏩High entries - almost all such investments require at least an INR 10-20 lac cheque sizes

⏩Tiresome procedures - extremely heavy and offline paperwork drives people away

Luckily, our first startup of the year FinPaddle is building a Fintech platform on a journey to make low-risk debt-linked investment instruments accessible to the common retail investor at small ticket sizes. The platform wants to democratise the world of low-risk, high-return asset classes and they’re building a platform to do just that in a way that’s never been done before.

FinPaddle is the category creator set to change this narrative. Think government securities and treasury bills being available at ticket sizes as low as INR 10k. There is no online player that is making it easy and accessible for the average retail investor.

Cath the Founder pitch LIVE today, 4th Feb, 5 PM and find out more. REGISTER HERE.

Why add them to your portfolio?

Here are some key reasons why debt funds make a great addition to your investment portfolio:


  • Diversification: Debt-linked investments provide an opportunity to diversify your investment portfolio, as they invest in a wide range of fixed income securities. This reduces your overall risk exposure, as the returns generated by these investments are relatively stable and not subject to the same level of volatility as equity investments.
  • Stable Returns: Debt-linked investments offer stable returns compared to equity-oriented investments. The returns on debt securities are usually fixed, making it easier to predict the returns you can expect from your investment.
  • Tax Benefits: Debt-linked investments also offer tax benefits, as the interest earned on bonds and other fixed income securities is taxed at a lower rate compared to equity-oriented investments.

In conclusion, they are a great investment option for individuals who are looking for stable returns and a diversified portfolio. By investing in debt-linked instruments, you can maximize your returns while minimizing your risk exposure.