A bearer bond is a type of fixed-income debt security where ownership is not registered in any centralised registry — the physical possession of the bond certificate serves as proof of ownership. Whoever physically holds the bond is entitled to receive interest (coupon) payments and principal repayment at maturity, without any identification requirement. This anonymous ownership structure historically made bearer bonds attractive for legitimate privacy purposes as well as for tax evasion and money laundering — since the identity of the owner was unknown to the issuer, coupons and principal could be collected without disclosure to tax authorities. As a result, bearer bonds have been largely eliminated in most countries through anti-money laundering regulations. In India, bearer bonds were abolished following the introduction of the Depositories Act in 1996 and the shift to dematerialised securities — all bonds and shares in India must now be held in electronic Demat form linked to a verified PAN and KYC-compliant investor identity. Globally, the Financial Action Task Force (FATF) and G20 anti-money laundering frameworks have pushed for the elimination or strict regulation of bearer bonds to combat tax evasion and illicit financial flows.
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