What Is Debt PMS? How Fixed-Income Portfolio Management Works

Most investors meet portfolio management services through equity. A debt PMS, sometimes called a debt portfolio management service, applies the same legal wrapper to fixed income: a SEBI-registered portfolio manager runs a portfolio of bonds and money market instruments for you under a written agreement, and the securities are held in your name rather than pooled.

That last point is the whole idea. When you buy a debt mutual fund, you own units of a scheme; the scheme owns the bonds. When you sign up for a debt PMS, the bonds themselves land in a demat account opened in your name. The SEBI (Portfolio Managers) Regulations, 2020 require the manager to keep each client's funds and securities segregated, and the same rules set the entry ticket: a portfolio manager cannot accept less than ₹50 lakh in funds or securities from a client.

Business Today, citing APMI data in November 2025, put debt PMS assets at about ₹40,351 crore across 169 mandates, with portfolios typically concentrated in 5 to 25 securities. That is small next to debt mutual funds, but it is now a recognised corner of the PMS market.

A fixed income PMS and a debt fund can hold similar paper, but the experience of owning them differs in five practical ways:

If you are still deciding whether fixed income belongs in your plan at all, our guide on equity versus debt funds covers that choice. This article assumes you want a bond allocation and asks whether a debt PMS is the right container.

Portfolio management in India has been regulated since the SEBI (Portfolio Managers) Regulations, 1993, replaced by the 2020 Regulations. For most of that history, PMS meant equities; fixed income stayed with banks, insurers and mutual funds, partly because institutions dominated the over-the-counter corporate bond market.

Several changes over the last five years made a bond-focused PMS more workable:

• 12 July 2021: the Reserve Bank of India launched RBI Retail Direct, letting individuals open a gilt account with the RBI for primary auctions and the NDS-OM secondary market.
• 9 December 2021: SEBI required portfolio managers to route part of their corporate bond trading through the exchanges' request-for-quote (RFQ) platforms.
• 26 August 2022: SEBI set a credit-rating floor and related-party limits for PMS investments in debt and hybrid securities.
• 16 December 2022: SEBI added a "Strategy" layer (Equity, Debt, Hybrid, Multi Asset) above each manager's investment approach and asked the Association of Portfolio Managers in India (APMI) to prescribe benchmarks. The framework applied from 1 April 2023.
• 1 April 2023 and 23 July 2024: tax changes removed long-term capital gains treatment for new debt mutual fund units and removed indexation for everything else, while setting a flat 12.5% rate on long-term gains. Listed bonds held directly kept access to that 12.5% rate after 12 months.
• 3 July 2024: SEBI allowed privately placed listed debt to be issued at a face value of ₹10,000, down from ₹1 lakh, widening the menu of tradable bonds.
• 7–8 October 2026: SEBI notified the SEBI (Portfolio Managers) Regulations, 2026, which take effect on 1 April 2027 and open primary debt issues to portfolio managers.

The 2023–24 tax shift is why advisers started talking about debt PMS: before it, a debt fund held for three years enjoyed indexation and a 20% rate, which was hard to beat.

A debt PMS manager builds the portfolio from a short list of instrument families. Under the 2020 Regulations, a discretionary manager may invest in securities listed or traded on a recognised stock exchange, money market instruments and mutual fund units. Money market instruments explicitly include commercial paper, treasury bills, certificates of deposit, trade bills and usance bills.

Government securities (G-secs) are dated bonds issued by the central government through the RBI, usually paying a half-yearly coupon over terms from a few years to several decades. They carry no meaningful default risk in rupee terms, which makes them the anchor of conservative mandates, but long-dated G-secs can swing sharply in price.

State development loans (SDLs) are the state-government equivalent and typically yield a little more than central G-secs of similar maturity. Treasury bills are short-term central government paper issued at a discount, used to park cash or hold a liquidity buffer.

An investor can buy all three directly through RBI Retail Direct. What a debt PMS adds is active choice of maturity and of when to switch between sovereign and corporate paper.

Corporate bonds and non-convertible debentures (NCDs) are issued by companies, banks, NBFCs and public sector undertakings. In Indian usage, "bond" and "NCD" overlap heavily; both are debt that does not convert into shares. They pay a spread over G-secs that compensates for credit risk and lower liquidity. A conservative mandate may stick to AAA and AA paper; a credit-oriented one may hold A-rated issuers to earn more yield.

Commercial paper (CP) and certificates of deposit (CDs) are short-term instruments from companies and banks respectively, used for the near end of the portfolio.

Some managers run a hold-to-maturity book, collecting coupons and redeeming at par; others trade duration actively, lengthening maturity when they expect rates to fall. Many combine both, and the disclosure document tells you which style you are buying.

A debt PMS sits inside the same SEBI rulebook as an equity PMS, but a handful of rules matter far more for bond portfolios. The current consolidated reference is SEBI's Master Circular for Portfolio Managers dated 16 July 2025.

Since 1 April 2023, under SEBI's performance benchmarking circular of 16 December 2022, every investment approach must be tagged to exactly one of four strategies: Equity, Debt, Hybrid or Multi Asset, with the manager's board responsible for the choice. A debt PMS is an approach tagged "Debt"; multi-asset mandates mixing equity, debt and gold carry their own tag.

APMI prescribes up to three benchmarks per strategy, and the manager must select one. In APMI's circular of 23 March 2023, the Debt benchmarks are:

The benchmark tells you a lot about the strategy. A manager benchmarking to the CRISIL Credit Index is telling you it takes meaningful credit risk; one using the medium-to-long duration index is telling you it makes interest-rate bets. Check the current choice in the manager's disclosure document, because APMI can revise the list.

There is also a guard against benchmark shopping: a manager can change the tag only after offering existing clients an exit without exit load, and the track record before the change cannot be used in performance reporting.

The most important protection for debt PMS investors is a credit floor. Under the Master Circular, portfolio managers offering discretionary services shall not invest in below-investment-grade securities. Non-discretionary managers cannot buy below-investment-grade listed securities, though they may put up to 10% of a client's assets into unlisted, unrated securities of non-associates, within the overall 25% cap on unlisted securities for non-discretionary and advisory clients.

Investment grade in Indian ratings runs down to BBB-, so the floor does not mean "safe". It means the manager cannot buy paper already rated as speculative. A portfolio can still hold BBB-rated credits, and a bond can be downgraded below investment grade after purchase.

SEBI also caps exposure to the manager's own group: debt and hybrid securities of a single associate are limited to 15% of a client's assets, 25% across all associates, and 30% across equity, debt and hybrid securities of associates. Unrated securities of associates are barred entirely, which matters when the manager's group owns an NBFC.

Two operational rules round this out. Managers must execute at least 10% of secondary market corporate bond trades by value on the exchange RFQ platforms, on a rolling three-month basis. And debt and money market securities must be valued under APMI's norms, which mirror mutual fund norms, using prices from APMI-empanelled valuation agencies.

SEBI notified the SEBI (Portfolio Managers) Regulations, 2026 on 7 October 2026 (published in the Gazette on 8 October 2026). They take effect on 1 April 2027; until then the 2020 Regulations and the July 2025 Master Circular apply.

Two changes matter for debt PMS investors. First, the investment list in the new regulations explicitly includes primary market issuance for debt securities, so managers can subscribe to new bond issues rather than only buying in the secondary market. Second, SEBI's board announced on 24 September 2026 that discretionary managers will be able to invest up to 10% of client assets in investment-grade, non-convertible, unlisted debt securities, with client consent. The notified regulations leave limits on unlisted securities to be specified by SEBI, so treat the 10% figure as announced and awaiting SEBI's detailed rules. The ₹50 lakh minimum stays.

Every bond portfolio is exposed to two distinct risks, and most disappointments come from confusing them. Interest rate risk is the risk that bond prices fall because market yields rise. Credit risk is the risk that an issuer fails to pay, or that the market starts to doubt it will. A G-sec portfolio carries the first and practically none of the second; a short-dated portfolio of A-rated NCDs carries little of the first and plenty of the second.

Bond prices move opposite to yields. The measure that tells you how much is duration. As a rule of thumb, a portfolio with a duration of four years would lose roughly 4% of its value if yields rose by one percentage point, and gain roughly 4% if they fell by the same amount. The approximation is: price change ≈ − duration × change in yield.

A long-duration mandate can therefore show negative returns for months even if every issuer pays on time. Morningstar India documented this in 2010–2013, when long-term bond funds lagged during rising rates and then outperformed once the RBI cut rates. If you hold to maturity, interim price swings reverse as the bond approaches par; the risk becomes real if you must sell, or if the manager trades duration and gets the call wrong.

Credit risk rarely announces itself with a missed payment on day one. It usually starts with a downgrade, and prices fall before any default. The clearest Indian example is IL&FS. Its long-term rating was cut from AA+ to BB on 8 September 2018 and to D on 17 September 2018. Morningstar India counted ₹2,283 crore of exposure across 12 fund houses and 32 schemes as of 31 August 2018. Paper that had been rated in the AA category a month earlier became distressed within days.

Concentration amplifies this: a fund holding 60 issuers that loses one takes a small hit; a PMS holding 12 bonds can take a large one. Look at the largest single-issuer weight, NBFC and real estate exposure, and the lowest rating in the book, not just the average.

Liquidity risk sits on top of both. Corporate bonds trade far less than G-secs, and in stress the bid can disappear just when you want to exit.

Debt PMS presentations usually lead with the portfolio's yield to maturity (YTM). YTM is the single discount rate that equates a bond's future coupons and principal with its current price. It assumes three things: you hold to maturity, every payment arrives on time, and every coupon is reinvested at the same yield. In real life, none of these is guaranteed.

A clean Indian example comes from the first Bharat Bond ETF, which matured in April 2023. Its YTM around launch was 6.69%. It delivered 6.54% annualised to 31 March 2023, against 6.61% for its index. The fund house attributed the gap to coupons being reinvested at different yields, since early coupons arrived in the low-rate period after Covid. That was a AAA public sector portfolio with no defaults, and the realised return still fell short of the starting YTM.

A debt PMS adds further layers between headline YTM and what lands in your account:

• Fees. Business Today reported debt PMS fees in a range of roughly 0.6% to 2.5% a year, with some mandates charging a performance fee of 6–15% of returns above a hurdle. GST at 18% applies on top.
• Reinvestment. Coupons and maturities must be redeployed at whatever yields prevail, the classic reinvestment risk.
• Credit losses. A single downgrade or default can wipe out a year's spread on a concentrated portfolio.
• Mark-to-market on exit. If you leave before bonds mature, you get market prices, not par.
• Tax. Coupons are taxed every year, as the next section explains.

The numbers below are illustrative, not a forecast or a real portfolio. Suppose a debt PMS shows a gross portfolio YTM of 8.5%, all from coupons on bonds held to maturity, with a 1% annual fixed fee.

The illustration ignores surcharge, reinvestment differences and any credit loss, all of which can move the outcome either way. Whether PMS fees reduce taxable interest is a contested question, covered in our post on PMS fee deductibility. The lesson is simple: compare products on expected post-fee, post-tax return, never on headline YTM.

From 1 April 2026, the Income-tax Act, 2025 replaced the 1961 Act. Section numbers changed, but the bond rules largely carried over from the July 2024 reforms. Because a PMS holds securities in your name, every coupon, sale and redemption is your own income.

The holding-period rule comes from the definition of short-term capital asset in section 2(101): listed securities and zero-coupon bonds become long-term after 12 months; most other assets need 24 months. The CBDT's July 2024 capital gains FAQs describe the same simplification, with indexation removed and the long-term rate reduced from 20% to 12.5%.

Tax deduction at source also applies. Under section 393(1), interest on securities attracts TDS at the "rates in force" above a ₹10,000 threshold, while interest on central and state government securities (other than certain savings bonds) is outside TDS. TDS is a credit against your final liability, not an extra tax.

The tax argument for a debt PMS starts with section 76. Units of a specified mutual fund acquired on or after 1 April 2023 are always taxed as short-term capital gains at your slab rate, however long you hold them. A specified mutual fund is one that invests more than 65% of its proceeds in debt and money market instruments, or a fund that puts 65% or more into such funds.

So, for debt PMS vs debt mutual fund decisions in the highest bracket:

• Price gains on listed bonds held over 12 months in a PMS are taxed at 12.5%; the equivalent gain inside a new debt fund unit is taxed at slab.
• Coupon income is taxed at slab in both cases, but in a PMS it is taxed every year, while in a fund it compounds inside the NAV and is taxed only when you redeem.

That deferral is valuable, so the answer is not automatic. A hold-to-maturity PMS earning almost all coupon gains little from the 12.5% rate and loses the deferral; one earning a meaningful share from price gains on listed bonds held over a year can come out ahead. Unlisted NCDs get no capital gains advantage, because section 76 treats them as short-term.

The Finance Act, 2026 did not, on the texts we reviewed, change these debt rules, but tax law moves every year and individual facts matter. Non-residents also face different withholding and possible treaty relief. Please consult a qualified tax adviser before choosing a structure on tax grounds.

For the right investor, a debt PMS offers real benefits:

1. Full look-through transparency. Every bond, rating, maturity and coupon date sits in your own demat account. You are not relying on a monthly factsheet.
2. Customisation. A manager can exclude issuers you dislike, match maturities to known cash needs such as a property payment or a child's education, or build a ladder that throws off predictable income.
3. Capital gains treatment on listed bonds. Price gains on listed bonds held over 12 months are taxed at 12.5% rather than slab, which new debt fund units cannot offer.
4. A credit floor and group limits. Discretionary managers cannot buy below-investment-grade paper, and related-party exposure is capped.
5. Comparable benchmarks. The Debt strategy tag and APMI's benchmark list let you measure a manager against a defined yardstick, and benchmark changes trigger an exit window.
6. Professional execution. Managers access RFQ platforms, new issues (from April 2027) and independent valuation, which most individual bond buyers cannot replicate easily.

Everything above comes down to a few checks: which benchmark a strategy uses, how it has done against that benchmark, and what sits inside the portfolio. PMS Sahi Hai is built for the first two, and it is honest to say where the third still needs the manager's own documents.

Start with the benchmark. The PMS listing on PMS Sahi Hai can be filtered by category label and by benchmark. Each strategy page shows trailing returns beside the strategy's stated benchmark, from one month to five years and since inception, with the difference shown as alpha. For a debt PMS, that tells you at a glance whether the manager chose the CRISIL Composite Bond Fund Index, the credit index or the duration index, and whether it has kept up with that choice. Our guide to benchmark selection in PMS explains why a convenient benchmark can flatter a weak record.

Read the debt data with its caveat. In our 2026 category benchmark review, the listing held 30 debt records across several benchmarks; in the largest group, 9 of 10 strategies were ahead of the CRISIL composite bond index over one year. We could not confirm that group's reporting date, so treat it as indicative, not as proof that debt managers reliably beat their benchmarks.

Let Nyra frame the questions. Nyra, the platform's AI-powered research tool, scores managers on five pillars. Its published Nyra methodology gives 30% of the Nyra Score to excess return over the stated benchmark across one, three and five years and 15% to consistency, with some metrics ranked within peer groups by asset class and category. A strategy needs at least 12 months of record to be rated, and the score is described as not a recommendation. For a debt mandate, a high score against an easy benchmark is your cue to ask harder questions.

What you still need from the manager. Strategy pages do not show holdings, so the rating mix, largest issuer weights and portfolio duration have to come from the disclosure document and a recent portfolio statement. Because every coupon and sale is taxed in your own hands, ask too how much past return came from coupons versus price gains.

The case against is equally concrete:

• High entry ticket. ₹50 lakh is a large slice of most portfolios to commit to a single manager's bond view.
• Fees eat the spread. Bonds earn a few percentage points; a fee of 1–2.5% plus GST consumes a large share of that, far more than in equity where expected returns are higher.
• Concentration. With 5–25 securities, one bad credit can hurt badly. The IL&FS episode shows that a high rating today is no guarantee.
• Annual tax drag on coupons. Coupons are taxed every year at slab, with no deferral.
• Liquidity. Exiting means selling bonds in a thin market, possibly at a discount. Exit loads may also apply under the agreement, subject to SEBI's caps.
• Downgrade after purchase. The investment-grade rule applies at purchase. A bond that slips below BBB- afterwards can remain in your portfolio while the manager seeks an exit.
• Mark-to-market visibility. Rate-driven price falls appear in your statement immediately, which can prompt poorly timed exits.

A debt PMS tends to fit:

• Investors with a fixed income allocation well above ₹50 lakh, so the PMS is one part of a diversified debt sleeve rather than all of it.
• Families and businesses with known future cash needs who value maturity matching and a bond ladder.
• Investors in high tax brackets whose strategy is likely to generate a meaningful share of returns from price gains on listed bonds held over a year.
• Investors who want to see and control issuer exposure, for example to avoid particular sectors or groups.

It is usually a poor fit for:

• Anyone who may need the money at short notice.
• Investors whose total debt allocation is close to ₹50 lakh; concentration would be extreme.
• Investors who mainly want steady coupon income and are in a high bracket, where a debt fund's tax deferral may win.
• Anyone uncomfortable with seeing individual bond prices fall during rate cycles.

A debt PMS is not a "safer equity PMS" or a high-yield FD. It is a transparent, individually owned bond portfolio with a credit floor, standard benchmarks and its own tax treatment. Its value rests on four questions: what credit risk and duration the manager is taking, how the benchmark choice reflects that, what you will earn after fees and tax rather than headline YTM, and whether you can live with the concentration and liquidity.

Use PMS Sahi Hai's listing to check benchmark choice and record, and Nyra to frame questions; then get the rating mix and duration from the manager. If you cannot answer those questions with numbers, a low-cost debt fund or direct G-secs may be the better start.

Before you sign any debt PMS agreement, put the facts side by side: strategy tag and benchmark, average and lowest ratings, duration, largest issuer weights, fees, exit load, and how much past return came from coupons versus price gains. Then estimate your post-fee, post-tax return against a debt fund or a direct G-sec ladder. That comparison, not headline YTM, is your best protection. Start by shortlisting debt-tagged strategies on the PMS Sahi Hai PMS listing, read each one's Nyra Score against its stated benchmark, and take the questions in this guide to the manager before you commit.