When you invest in a bond, you are lending money to the issuer which could be the central government, a state government, or a company. In return, the issuer agrees to pay you periodic interest (the “coupon”) and return the principal at the end of the bond’s term.

Bonds are part of the “fixed-income” universe: compared to equities, they tend to offer more predictable returns and generally lower risk (when you pick safe issuers).

In India, three common bond-types for retail investors are: central-government bonds (G-Secs), state-government bonds (SDLs), and corporate bonds. Each has its own trade-offs between safety, yields, and risk exposure.

Central Government Bonds (G-Secs) - The Safest Bet
Bonds issued by the central government collectively called “government securities” or “G-Secs” are among the safest fixed-income assets in India. The central government issues these via the Reserve Bank of India (RBI), and investors lend money to the government in return for interest and repayment at maturity. 
Key characteristics:
•    You receive interest (coupon) payments usually twice a year, credited directly to your bank account.
•    At maturity, your principal gets repaid automatically.
•    Because the government backs them, default risk is effectively negligible - this makes G-Secs the “risk-free” benchmark for Indian investors.
•    G-Secs require a minimum investment (for primary issuance) in multiples of ?10,000. 

G-Secs are generally suited for investors who prioritise safety and want a predictable income stream over the long-term.
However, a few caveats: most G-Secs are not very liquid (i.e. harder to buy/sell at attractive prices before maturity), and their market value can fluctuate if interest rates change.

State Development Loans (SDLs) - Slightly Higher Yield, Slightly More Risk
State Development Loans (SDLs) are bonds issued by state governments (rather than by the central government) to meet state-level borrowing needs. The mechanism is broadly similar to G-Secs - you lend money, receive coupon payments and get principal back on maturity.
Since SDLs are backed by state governments and not the central - their credit risk is a bit higher than G-Secs. That said, many consider them very low-risk, especially when issued by fiscally sound states.
Because of the slightly higher risk, SDLs tend to offer a small yield premium over comparable G-Secs offering a middle path between ultra-safe government debt and riskier corporate bonds.
For investors willing to accept minimal extra risk for a bit more return and planning to hold till maturity - SDLs can be a useful addition to a fixed-income portfolio.

Corporate Bonds - Higher Return, Higher Risk
When companies public or private need to raise funds, they may issue debt instruments known as corporate bonds (or NCDs). Investing in such bonds means you are lending to a company, which promises periodic interest payments and to return your capital at maturity.
Corporate bonds carry more risk compared to government and state bonds primarily because the repayment depends on the financial health and creditworthiness of the company. As a result, corporates must offer higher yields (coupon rates) to attract investors. 
Within corporate bonds, risk and return vary widely: bonds from financially strong companies (investment-grade) tend to be more stable with decent returns; bonds from weaker firms offer high yields but come with higher default risk.
Liquidity can also be a concern: while some corporate bonds trade on exchanges, liquidity depends on demand which may be limited making early exit potentially difficult.
Corporate bonds are therefore more suitable for investors who are comfortable doing a bit of homework (checking the company’s financials, credit rating) and willing to take on higher risk for better returns.

What to Keep in Mind When Choosing
•    Risk-return trade-off: G-Secs give the highest level of safety but lower yields; SDLs give slightly better yield at small extra risk; corporate bonds offer higher returns but with significantly more risk.
•    Issuer strength matters: For corporate bonds (and even SDLs), the creditworthiness of the issuer is important. A strong issuer means more reliability.
•    Holding horizon and liquidity: If you plan to hold until maturity, bond-type and issuer quality matter less for cash flows. But if you need to sell earlier, liquidity and market demand become important.
•    Interest-rate fluctuations: Bond prices move inversely to interest rates. Long-dated bonds (central or state) will see bigger swings with interest rate changes.
•    Diversification: For many investors, a mix of G-Secs for safety, a few SDLs for balanced yield, and selective corporate bonds for income makes sense, rather than putting all money in one kind.

Final Thoughts - What a Beginner Should Do
If you’re new to bonds and want to keep things simple and safe: start with G-Secs. They offer government backing, predictable income, and long-term security.
If you have a bit of risk appetite but still want low-to-moderate risk: consider mixing in some SDLs.
If you are ready to put in effort then inspect companies carefully, monitor credit quality and want higher income: selectively investing in corporate bonds can be rewarding (though you must be aware of the risks).