The Reserve Bank of India has announced the interest rates for its Floating Rate Savings Bonds for the July-December 2024 period. These bonds are a popular choice for fixed-income investors. The new rates are effective from July 1, 2024.
Floating Rate Savings Bonds give investors interest payments semi-annually, with the next payout on January 1, 2025. Its interest rate is linked to that of National Savings Certificate (NSC), a small savings scheme backed by the Indian government. The RBI Floating Rate Savings Bonds interest rate is 0.35% higher than that of the NSC.
The RBI has notified the interest rate for the Floating Rate Savings Bonds.
What is RBI Floating Rate Savings Bond?
RBI Floating Rate Savings Bond features a variable coupon payment, which means the interest rate of this bond keeps fluctuating during its term.
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RBI Floating Rate Savings Bonds, 2020 (Taxable) interest rate for July-Dec 2024
The RBI Floating Rate Savings Bond will provide an interest rate of 8.05% for July-December 2024.
“In terms of Para 13 (ii) of Government of India Notification F.No.4(10)-B(W&M)/2020 dated June 26, 2020 on Floating Rate Savings Bonds, 2020 (Taxable)-FRSB 2020 (T), the coupon/interest rate of the bond would be reset half yearly, starting with January 01, 2021 and the coupon/interest rate will be set at a spread of (+) 35 bps over the prevailing National Savings Certificate (NSC) rate. Accordingly, the coupon rate on FRSB 2020 (T) for the period July 01, 2024, to December 31, 2024, and payable on January 1, 2025, remains at 8.05% (7.70%+0.35%), unchanged from the previous half-year,” the RBI said in a release.
RBI Floating Rate Savings Bonds interest rate is reset twice a year. As and when the interest rate on NSC rises, the Reserve Bank Floating Rate Savings Bond’ interest rate increases. Conversely, if the interest rate on NSC decreases, the interest rate on the RBI Floating Rate Savings Bond will also decrease.
Interest is payable semi-annually on January 1 and July 1 each year. Therefore, investors will receive the next interest payment on January 1, 2025. The interest earned is taxable for investors, and you cannot claim any tax deductions for investing in these bonds.
Eligibility:
The bonds are open to investment by individuals (including joint holdings) and Hindu Undivided Families. NRIs are not eligible for making investments in these bonds.
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Tenure of RBI floating rate savings bond
The RBI Floating Rate Bond has a lock-in period of seven years, with no premature withdrawal option. However, senior citizens have the option to withdraw money prematurely with a penalty after a minimum lock-in period. For those aged 60 to 70, the lock-in period is six years. For those aged 70 to 80, the lock-in period is five years. Those aged above 80 can withdraw their investment after four years from the date of investment.
Minimum and maximum investment in RBI floating rate savings bond
The RBI Floating Rate Savings Bond has a minimum subscription amount of Rs 1,000 and must be purchased in multiples of Rs 1,000 thereafter. There is no maximum limit. Loans cannot be taken against RBI Floating Rate Savings Bond 2020 (Taxable) bonds.
RBI floating rate bonds score low on liquidity due to a lock-in period of seven years, with only certain investors eligible for premature withdrawal. However, they are among the highest-yielding debt instruments available in India at the moment. Experts suggest that anyone with excess liquidity who does not need the money for seven years can consider investing in RBI floating rate bonds.
