Exim Bank Pulls ₹2,500 Crore Bond Sale; Bond Basics
Why in the news
Exim Bank called off its ₹2,500 crore, 10-year bond offering because investors wanted yields above what the bank had expected, market sources said.
Key facts
- A bond is a loan from investors to a company: principal is repaid at maturity with interest paid periodically till then.
- Bond interest depends on the issuer’s credit quality and the tenor; healthier firms and shorter terms pay less.
Bonds vs bank loans
- Cost: bonds generally carry lower interest than bank loans.
- Freedom: loans often bar extra borrowing or acquisitions; bonds usually do not.
Types of bonds
| Type | Feature |
|---|---|
| Collateralized | Backed by assets such as property or equipment; holders can claim them on default |
| Unsecured | No asset backing, so riskier and costlier |
| Convertible | Can be turned into a set number of shares |
| Callable | Issuer may redeem before maturity |
Why issue callable bonds
- If market rates drop, the company can retire the debt and borrow again cheaper, like refinancing a home loan.
Corporate vs government bonds
- Corporate bonds fund business activity; government bonds fund public spending.
- Corporates default more often, hence higher risk and usually higher returns.
Exam angle
- Size and tenor of the withdrawn issue: ₹2,500 crore, 10 years.
- Bond that can be exchanged for shares: convertible.
- Bond the issuer can repay early: callable.