A Bond is considered to be a debt security, under which the company that issues bonds owes the bond holders a debt and are required to pay them interest depending upon the terms and conditions of the bond. The interest can be paid either annually, half-yearly or monthly.

In simple words, companies require money for expanding their business and sometimes the capital required for it is more than what can be issued by banks as loans. In that case, these companies issue bonds in market. As a result a number of investors come forward to raise money by lending a certain amount of funds that are needed and the companies thus issue bonds to them.

The amount thus borrowed is called face value and the interest rate paid is called Coupon. Different types of bonds offered here are:

Public sector undertaking bond
For people looking for medium or long term investment option in bonds, Public Sector Undertaking (PSU) bonds are the best you can get. These bonds are issued as well as backed by government of India but are sold on private basis. The government targets the investors on its own and offer these bonds at fixed rates.

Corporate Bonds
Corporate bonds are issued by private companies for the time period of up to 15 years. Unlike PSU bonds, these can be purchased by anyone. These bonds promises high returns. However, they do involve certain amount of risk.

Financial Institutions and Banks
These bonds are issued by various financial institutions and banks. They are popular among investors and make up most of the bond market. These bonds are well regulated and have good ratings.

Emerging Markets Bonds
Emerging markets bonds are issued abroad as hard currency by the government in order to raise capital for economic development. They are issued in US dollars or the euros.