Definition
Fractional Bonds
Fractional bonds let retail investors buy a small portion of a bond that traditionally required a large minimum investment, lowering the entry barrier to debt investing.
Fractional bonds break a high face-value bond into smaller affordable units so retail investors can participate with modest amounts, accessing yields once reserved for institutions. Platforms enable this by allowing partial holdings.
With SEBI's reduction of face values for privately placed listed debt and the rise of OBPPs, retail access to bonds in smaller lots has improved. Investors still earn proportionate coupon and price returns.
The usual bond risks apply — credit, interest-rate and liquidity — and investors should verify the platform's regulatory status and the bond's rating before buying fractions.
Related terms
- Bond Investing PlatformsBond investing platforms are SEBI-regulated online avenues, including Online Bond Platform Providers, that let retail investors buy listed corporate and government bonds in small lots.
- Online Bond Platform Provider (OBPP)An Online Bond Platform Provider is a SEBI-registered entity that offers listed debt securities to retail investors through an online platform under a dedicated regulatory framework.
- Yield to Maturity (YTM)Yield to maturity is the total annualised return an investor would earn on a bond if held to maturity, accounting for its price, coupons and the gain or loss to face value.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.