Coupon Rate is the fixed annual interest rate a bond promises to pay, expressed as a percentage of face value. A ₹1,000 face-value bond with an 8% coupon pays ₹80/year (usually split semi-annually as ₹40 + ₹40). Coupon is set at issuance and never changes — yields do.
Worked INR example
The 7.26% GS 2033 G-Sec has a coupon rate of 7.26% paid semi-annually. On a face value of ₹10,000 the holder receives ₹363 every six months (₹726/year). If market yield rises to 8%, the bond price falls below ₹10,000 so a new buyer earns 8% YTM on the lower price even though the coupon is still 7.26%.
When to use
- Comparing direct G-Sec purchases on RBI Retail Direct by coupon
- Computing pre-tax cash flow from a corporate-bond portfolio
- Distinguishing high-coupon legacy bonds from low-coupon new issues
SEBI / RBI caveat
Coupon is gross of TDS for resident investors above the ₹5,000 G-Sec interest threshold per year (Sec 193). Floating-rate bonds (e.g., FRSB 2020) reset coupon every 6 months — read the offer document. Tax-free bonds (NHAI, REC pre-2016) have lower coupons because interest is exempt under Sec 10(15).
Related terms: YTM, Accrued Interest, Credit Rating.