Public Sector Undertaking Bonds (PSU Bonds) are essentially medium or long term debt instruments issued by Public Sector Undertakings (PSUs) that owned and managed by the central or the state government. The term usually denotes bonds issued by the central PSUs (ie PSUs funded by and under the administrative control of the Government of India). Most of the PSU Bonds are sold on Private Placement Basis to the targeted investors at Market Determined Interest Rates. Often investment bankers are roped in as arrangers to this issue. Most of the PSU Bonds are transferable and endorsement at delivery and are issued in the form of Usance Promissory Note.

In case of tax free bonds, normally such bonds accompany post dated interest cheque / warrants.