We make issuance, buying and re-selling of bonds as easy as transferring money through UPI.
India has been reporting a surge in numbers of investors, moreover, there’s an increase in financial literacy of Indians in past few years. However, FDs are the only option for savings or an alternative to that is only Stocks. No one likes the returns on FDs, and hardly people at large find time and motivation to invest in stocks.
Bonds are the middle ground and set to double by 2030 to roughly USD 6 trillion. Currently, India’s bond market is of ~$1.9 trillion.
India’s bond market is comparatively much smaller than the stock market, however, any leading economy like China, USA etc. have a Bond market as big as their stock market.
But WHY? Well:
Bond Market in India has minimum investment limit at 1L. While 70% of Indian retail investors earn less than 5L annually. This narrows the investment possibilities in Bonds only to HNI, seasoned investors, fund managers, wealth advisors etc.
There’s not enough depth(liquidity) in secondary bond market of India. According to an ASSOCHAM and CRISIL report as of end of 2022, only ~$132 bn worth of bonds were traded in secondary market while ~$492 bn were in outstanding. This keeps a lot of investors who are not investing for long term away from the market as it’s hard to liquidate bonds.
High friction: Anyone who has no access to fund managers, or understands investment product has a steep learning curve and user experience to issue, buy and re-sell bonds. The underlying tech makes settlement hard.
Settlement isn’t truly digital: Just like UPI has a separate pool for settlement of payment among banks which takes roughly 2-3 days. Bonds or any other financial transaction isn’t truly digital, just “online operation/info sharing” of offline settlements. This results in slow processing, hard/complex processes, and no innovation.
FPIs i.e. foreign portfolio investors face a lot of problems during investment in Indian bonds. Specially, their is a lack of seamless user experience because of broken backend tech which takes a lot of time.
A platform which opens the private bond market to masses.
How?
We can bring it even lower by fractionalization of a unit of bond i.e. bringing down the min investment limit in the range of retail investors.
While, this is possible rn, but not with the existing technology. That’s where we’ll bring in the tokenization, which would make bonds truly digital, and hence their settlement, secondary trades, transfer of rights/profits etc etc as easy as UPI payments.
Access of Bonds to Indian investors at large:
User experience is the key to market access and awareness. We want to make exploration of bond market as easy shopping online. The user should feel the confidence that they’re secure and not a scape goat. In any relationship communication matters, and here we wish to will be the masters of it. Just like Zerodha.
A truly digital settlement of bonds: CBDC/e-rupee is a truly digital currency issued by RBI. If you have an e-rupee in your accn it isn’t a digital representation of a money in your bank which was printed by RBI. However, each e-rupee contains history of info with it so no one else on internet can issue something like that (cryptography at work).
Similarly, tokenisation of Bonds will make them truly digital. So, no hassle for offline paperworks and settlement. This would also make provenance easy, basically the history of who issued it, owned it, price changes, profit made etc. etc. 5. FPIs can easily invest in tokenise bonds through real time international settlements facilitated by stable coins on blockchain. This would open up a huge market for FPIs in India.