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Inflation-Indexed Bonds (IIBs) Vs Capital Indexed Bonds (CIB



  Jun 12, 2024

Inflation-Indexed Bonds (IIBs) Vs Capital Indexed Bonds (CIBs)



Feature Inflation-Indexed Bonds (IIBs) Capital Indexed Bonds (CIBs)
Example Principal ₹10,000 ₹10,000
Annual Interest Rate 5% 5%
Inflation Rate 3% 3%
Adjusted Principal ₹10,300 (₹10,000 * 1.03) ₹10,300 (₹10,000 * 1.03)
Interest Payment ₹515 (5% of ₹10,300) ₹500 (5% of ₹10,000)
Principal & Interest Both Adjusted? Yes No
Indexed To A Price Index A Price Index
Suitable For Complete inflation protection for principal and interest Inflation protection for principal only

► In an Inflation-Indexed Bond (IIB), both the principal amount and interest are adjusted according to inflation. So, in our example, the interest is 5% of the adjusted principal of ₹10,300, which results in ₹515.

► In a Capital Indexed Bond (CIB), only the principal is adjusted for inflation. The interest remains 5% of the original principal of ₹10,000, resulting in ₹500.




Feature Inflation-Indexed Bonds (IIBs) Capital Indexed Bonds (CIBs)
Protection Principal + Interest Only Principal
Interest Payment ₹515 (5% of ₹10,300 ) ₹500 (5% of ₹10,000)
Adjustment Both Principal and Interest Only Principal


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