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Can a bond offering 13% interest be as safe as it sounds?
Is clicking “Invest Now” on an online bond platform enough due diligence?
If a platform shows it, does that mean it’s safe?
If you’re a retail investor drawn to high-return bonds via online platforms, the recent TruCap Finance bond default should serve as your wake-up call.
Many investors are now trapped — not just because TruCap defaulted, but because they blindly trusted platforms that pitched these bonds as attractive alternatives to fixed deposits.
Let’s break down what happened, why so many got trapped, and what you need to watch out for.
Table of Contents
- What Really Happened in the TruCap Bond Default
- How Online Bond Platforms Mislead Retail Investors
- The Illusion of High Returns and Hidden Risks
- Credit Ratings Are Not Crystal Balls
- Why Bonds Are Not FDs — Despite the Marketing
- Liquidity, Safety, and the Exit Problem
- A Smarter Alternative: Debt Mutual Funds
- How to Invest in Bonds Without Losing Sleep
- Final Thoughts: Stay Curious, Stay Skeptical
1. What Really Happened in the TruCap Bond Default
TruCap Finance, a non-banking financial company (NBFC), issued non-convertible debentures (NCDs) offering 13%–13.5% annual returns — far more than your average bank fixed deposit.
These bonds were distributed via popular online bond platforms like BondsIndia, GoldenPi, Grip, and Altifi (Northern Arc).
At first, everything looked great — until TruCap defaulted.
They failed to pay both interest and principal on several bond series. The total investor exposure? Around ₹55 crores.
Suddenly, thousands of investors were stuck, left with no clear answers and no guaranteed way to get their money back.
2. How Online Bond Platforms Mislead Retail Investors
Online bond platforms have made bond investing accessible — but at what cost?
These platforms are SEBI-registered as distributors, not fiduciaries.
Their role is to facilitate transactions — not to vouch for the safety or suitability of the bonds they display.
However, many platforms boldly promote high-yield bonds like:
- “Secure 13% annual returns!”
- “Better than a fixed deposit!”
- “Backed by trustee agreements!”
Unfortunately, the risks are often buried in fine print, or explained in technical jargon that most investors skip.
Platforms like BondsIndia, GoldenPi, Grip, and Northern Arc (Altifi) focus heavily on coupon rates but rarely educate users on issuer health, downgrade risks, liquidity constraints, or default history.
Why? Because higher-risk bonds usually offer better commissions to distributors. The higher the yield, the greater the incentive to promote.
3. The Illusion of High Returns and Hidden Risks
Let’s be blunt: a 13% coupon is not a gift — it’s a warning sign.
Companies pay high interest only when they can’t raise funds cheaply — often due to poor financial health.
TruCap’s own credit rating was BBB, barely investment-grade.
And when its loan book weakened, that rating plummeted, triggering clauses that required early repayment — which the company couldn’t meet.
What followed was inevitable: default, and investors holding worthless paper.
High-yield bonds aren’t inherently bad.
But blindly trusting online bond platforms that showcase only the good and ignore the bad? That’s where the real danger lies.
4. Credit Ratings Are Not Crystal Balls
Many investors rely on credit ratings — but remember, these are opinions, not guarantees.
Even IL&FS had a AAA rating before collapsing.
A BBB-rated bond can quickly become junk if the issuing company hits a rough patch.
Yet online platforms rarely emphasize that ratings can change quickly and drastically — especially in volatile NBFC sectors.
Trust ratings, but verify them — and understand their limitations.
5. Why Bonds Are Not FDs — Despite the Marketing
Online bond platforms love comparing bonds to FDs. But that’s misleading.
| Feature | Bank Fixed Deposit | Corporate Bond |
|---|---|---|
| Guarantee | ₹5 lakhs insurance (DICGC) | No guarantee if issuer fails |
| Liquidity | Easy early exit (penalty) | May be difficult to sell |
| Tax Treatment | Taxed yearly | Taxed only on capital gains |
| Safety | Regulated and protected | Entirely dependent on issuer |
Don’t be fooled by platform visuals or bold coupon percentages. Bonds carry real risk.
6. Liquidity, Safety, and the Exit Problem
Trapped. That’s how many TruCap investors feel.
Bonds are often illiquid — especially low-rated ones.
You may not find buyers if you want to exit before maturity. And even if you do, prices may be far below your purchase cost.
Unlike mutual funds, bonds don’t give you easy exits. When defaults or downgrades happen, you’re often stuck watching your money disappear slowly.
7. A Smarter Alternative: Debt Mutual Funds
If you’re looking for low-risk, fixed-income investments, debt mutual funds may be a better fit.
Consider categories like:
- Banking & PSU Funds: Invest in high-rated bank and government debt
- Gilt Funds: Invest in sovereign government securities
Advantages?
✅ Professional fund management
✅ Liquidity — redeem anytime
✅ Tax efficiency — taxed only on capital gains upon withdrawal
While they may not offer 13%, they do offer stability, transparency, and peace of mind.
8. How to Invest in Bonds Without Losing Sleep
Before clicking “Invest” on any online bond platform, ask yourself:
- Do I understand the issuer’s business and credit history?
- What’s the real risk behind this 12–13% return?
- Is the bond secured or unsecured?
- What will I do if I want to exit mid-way?
- Am I exposing too much to one issuer?
If these answers aren’t clear, step back.
Consult a trusted advisor or stick to safer instruments. Chasing returns without understanding risks has burnt too many already.
9. Final Thoughts: Stay Curious, Stay Skeptical
The TruCap bond default is not a one-off — it’s a symptom of a broader issue.
Retail investors are being nudged toward risky instruments through glossy interfaces and simplified apps.
Online bond platforms have made investing easy — but not necessarily safe.
So, the next time you see an ad saying “Earn 13% safely with corporate bonds,” pause and ask:
“If this bond is so safe, why isn’t a bank buying it instead of me?”
If you can’t answer that confidently, you’re not ready to invest.
A few minutes of research can protect you from months — or years — of regret. Be skeptical. Be smart.
And when in doubt, speak to a Financial Advisor who puts your interest above commissions.
Stay safe. Stay informed. Invest with your head, not just your heart.
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