Fixed income instruments or fixed income securities are debt instruments that provide returns in the form of regular or fixed interest payments. Also, there is repayment of the principal amount on the maturity date. Therefore, investors will know the corpus value they will receive post maturity at the time of investment.

Fixed income instruments act as a liability for the issuer in the market. Also, the interest payments of a fixed income instrument depend on the creditworthiness of the issuer. Hence, this type of security is popular among investors who do not want to expose themselves to risks. Also, such investors wish to earn steady returns on their investments.

Types of Fixed Income Instruments
Fixed deposits are one of the most popular investment options in India. Banks and other financial institutions offer this instrument. A fixed deposit offers a fixed interest rate on the principal investment for a predetermined period.

Government Bonds
Government bonds are debt instruments that the Central and State government in India issue to finance their needs and regulate the money supply. The RBI issues bonds on behalf of the government, where it sells bonds to the public by inviting investments. The government will repay the principal and interest on the specified maturity date.

Corporate Bonds
Companies issue corporate bonds. Companies issue them because the bond market offers debt at a lower interest rate and favourable terms. Hence most companies prefer issuing bonds over bank loans. The corporate sector represents a large portion of the bond market. They pay higher yields than government bonds. However, they suffer from inflation risk, interest rate risk and credit risk.