TruCap default reveals risks of high yield bonds in India. Know why blindly trusting online bond platforms for high returns can cost investors.
Recently, many retail investors were shocked when TruCap Finance, a non-banking finance company (NBFC), defaulted on its bond payments. According to Mint, the company failed to pay interest and principal due on some listed non-convertible debentures (NCDs). Many common investors are now stuck, not knowing when or if they will get their money back.
But this is not just about TruCap. This is about a dangerous trend — chasing high yields on bonds without understanding the risks, often lured by flashy online bond platforms that showcase tempting returns.
Let’s break this down in simple language.
Today, investing in bonds is just a click away. Many new-age platforms advertise bonds with 8%, 10%, or even 12% annual returns — far higher than your bank fixed deposit (FD) rates of 6-7%. They highlight these high coupon rates in bold letters. For many retail investors, especially those who want “safe” investments, this looks very attractive.
But here’s the catch: higher return always comes with higher risk. Many investors don’t realise that bonds are basically loans you give to a company — and if that company is financially weak, it might not pay you back.
Just because these platforms are SEBI registered does not mean the bonds offered from such platforms are safe. They are just the platform providers, and for that, they are registered with SEBI, but not to provide you the best possible guaranteed returns.
A few days ago, I created a YouTube short after I noticed many people were asking me about such platforms. You can refer to it here.
TruCap Finance Ltd is an NBFC that lends money to small businesses and offers gold loans. To raise funds for its lending business, TruCap issued non-convertible debentures (NCDs) — basically bonds — to the public.
Many investors thought: “Better than an FD, safe enough, great returns!”
But the reality turned out to be very different.
In simple words:
This means common investors — retirees, salaried people, even small HNIs — are now helplessly waiting for some resolution.
The biggest reason: High returns looked too good to resist.
Online bond platforms show these bonds as if they are better versions of FDs — “Earn 13% safely!”
But they often do not explain enough about:
Many investors do not read the fine print — they trust big words like “listed”, “trustee”, “secured”, or “NBFC”. They assume these make it safe. But remember — the company still has to earn money to pay you.
Many investors think “higher interest is always better”. But they forget that in bonds, return is directly linked to risk.
Here’s why:
Many online platforms present bonds like an “FD with better returns”. They showcase the coupon rate boldly, but the risk factors are often hidden in footnotes.
Some don’t explain:
Some platforms even promote low-rated or unrated bonds aggressively because they get higher commissions from issuers.
This makes the retail investor think they are buying something “safe” — when in reality, they are lending money to companies that even big banks might avoid!
SEBI, India’s market regulator, has repeatedly cautioned retail investors about blindly investing in debt instruments. For example, in its investor education initiatives, SEBI explains that corporate bonds, especially those with lower credit ratings, can carry significant credit risk.
RBI, too, through its financial literacy programs, reminds people that corporate bonds are not risk-free like government securities.
AMFI (Association of Mutual Funds in India) also says that retail investors who want debt exposure should ideally stick to well-diversified debt mutual funds or government bonds instead of putting large sums in a single company’s bond.
How to Be a Smart Bond Investor
1. Understand credit ratings: AAA means highest safety (like SBI or Indian Railways bonds). Anything below AA needs careful study. B or C means high risk. Assume that the current rating is AA; then it does not mean that the rating will remain the same throughout your investment period. If there are any changes in the financial status of the issuing company, then the same rating agencies either may downgrade or upgrade the rating.
2. Check the issuer: Is the company fundamentally strong? Does it have profits? How is its past repayment record?
3. Diversify: Never put all your money into one bond. Spread your debt investments across multiple bonds or choose mutual funds that do it for you. If you are in the accumulation phase, then debt mutual funds are far better than exposing yourself to a few bonds and creating a huge concentrated risk.
4. Check if secured: Secured bonds have collateral — unsecured ones don’t. If things go wrong, secured bond investors have some claim on company assets.
5. Stay within your risk appetite: If you can’t handle delays or defaults, stick to Government of India bonds, RBI bonds, or top-rated PSU bonds.
6. Don’t trust only platforms: Platforms are intermediaries. They may not take responsibility if the company defaults.
Final Words: If it looks too good to be true, it probably is
Bond investing is not the same as keeping money in an FD. The TruCap incident is a reminder that yield chasing can backfire badly.
Always remember: “Higher risk, higher return” is not just a saying — it’s reality. And when the risk materialises, the losses can hurt.
So, next time an online bond ad flashes “12% secure bond”, take a step back. Ask: “Why is this company paying me double the bank rate? Is it worth the risk?”
If you can’t answer these questions, talk to a trusted fee-only financial advisor. Or stick to safe options.
Stay informed, stay safe
Bonds are powerful tools, but they need caution and understanding. Don’t be blinded by big numbers. Be wise, read the fine print, and invest smartly.
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