State-owned Life Insurance Corporation of India has held talks with major banks this year about purchasing zero-coupon bonds, known locally as STRIPS bonds, which are created by separating the principal and interest components of the government’s debt, the people said, asking not to be identified because the talks are private. The conversations took place in recent weeks, the people said.
The talks underscore broader structural changes in India’s financial markets, as competition with equity markets pushes insurers to design products that deliver higher payouts over longer time horizons. However, securities stripped in this way are highly illiquid, causing sharp price fluctuations that can impact investment portfolios.
Trading in zero-coupon government bonds has increased more than sixfold in the past five years, mainly thanks to demand from insurers and pension funds. The securities are sold at a discount and are paid out at maturity, allowing investors to reduce reinvestment risk.
LIC, which managed assets worth about $603 billion as of September 1, 2025, did not immediately respond to an email from Bloomberg seeking comment.
LIC has so far avoided the instruments due to the additional costs involved, the people said. Purchasing STRIPS bonds requires intermediaries, such as primary dealers, to strip conventional government bonds into zero-coupon components.
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Published on February 5, 2026
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