Zero Coupon Bonds

Zero coupon bonds are a type of fixed-income security that do not offer periodic interest payments (coupons). Instead, they are issued at a discount to their face value and redeemed at full face value upon maturity. The return for investors is the difference between the purchase price and the redemption value. In India, these instruments—also known as zero coupon debentures—are ideal for investors who prefer lump-sum maturity payouts over regular income, and who want to avoid reinvestment risk and interest rate fluctuations. Since they lock in returns at the time of purchase, they offer predictable, fixed returns regardless of market volatility.

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