Want to earn more than FD, NSC? Invest in 100% risk-free RBI bonds

RBI Floating Rate Savings Bonds are government-backed savings instruments tailored to offer Indian investors a secure investment with a competitive interest rate. Unlike fixed-rate bonds, the interest rate on RBI Floating Rate Savings Bonds is not fixed during its maturity tenure. The interest rate is linked to the prevailing interest rate of the National Saving Certificate (NSC) with a spread of 35 basis points (bps).

Non-tradeable RBI Floating Rate Savings Bonds are issued and guaranteed by the Government of India, making them safe, reliable and profitable investment options. The sovereign guarantee on the RBI Floating Rate Savings Bonds makes sure that the principal amount and interest earned on them are safe and secure.

RBI Floating Rate Savings Bonds: Eligibility 

The RBI Floating Rate Savings Bonds are open to investment by Indian residents (including Joint Holdings) and Hindu Undivided Families. Father, mother or legal guardian can invest on behalf of a minor. Non-resident Indians (NRI)s are not eligible for investing in these bonds.

The investor must have a bank account to facilitate payment of interest, the maturity value directly to his/her bank account.

RBI Floating Rate Savings Bonds: Features and Benefits

Interest Rate:  The RBI Floating Rate Savings Bond officially pays 35 bps over the NSC rate. The interest rate is subject to revisions every six months, ensuring that investors stay ahead of inflation and market volatility. As interest rates change every six months, investors have the potential to earn higher returns if market rates increase.

Maturity period: The tenure of the RBI Floating Rate Savings Bond is seven years from the date of issue. No interest will accrue after the maturity of the bond. Premature redemption facility is allowed for investors in the age group of 60 years and above as per the RBI notification.

The lock in period for senior citizens: 60 to 70 years—6 years; 70 to 80 years— 5 years, Age of 80 years and above— 4 years

Limit of investment: The RBI Floating Rate Savings Bonds are issued for a minimum amount of Rs. 1000/- (face value) and in multiples thereof. There is no maximum limit for investment in Bonds.

Tax benefits: The interest income generated from the bonds is taxable. TDS (Tax Deducted at Source) is deducted at the time of interest payment as per the prevailing IT rules. However, the RBI bonds will be exempt from wealth tax under the Wealth- tax Act, 1957.

Nomination: The sole holder or all the joint holders may nominate one or more persons as nominee under the provisions of the Government Securities Act, 2006.

Transferability and Tradability: The RBI Floating Rate Savings Bonds are not transferable. Transferability is limited to nominee(s)/legal heir in case of death of the holder.

These RBI bonds are not eligible as collateral for availing loans from banks, financial institutions and NBFCs.