Fixed-income investors are in for a treat as the high interest rate of RBI Floating Rate Savings Bond (FRSBs), 2020 (Taxable) is going to continue for the July-December period of 2024. The interest rate of the RBI Floating Rate Savings Bond is linked to the interest rate of the National Savings Certificate (NSC), a small savings scheme backed by the Union government. The interest rate of RBI Floating Rate Savings Bonds is 0.35% higher than what NSC offers. The Reserve Bank of India has notified the interest rate of RBI Floating Rate Savings Bonds for the July-December period on Monday, July 1, 2024. How much interest rate will RBI Floating Rate Savings Bond fetch from July 1 to December 32, 2024? Read here to find out.
What is the interest rate of RBI Floating Rate Savings Bond, 2020 (Taxable) for the July-December period?
From July-December 2024, the RBI Floating Rate Savings Bond will fetch an interest rate of 8.05%. In a press release dated July 1, 2024, RBI said, “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.”
When will you get the interest of RBI floating rate savings bond?
The interest rate of RBI floating rate savings bonds is not fixed. It is reset twice in a year. When the interest rate on NSC goes up, then the RBI floating rate savings bond will offer a higher interest rate. Similarly, if the interest rate of NSC goes down, the interest rate on RBI Floating Rate Savings Bond will also come down.
The interest is payable semi-annually. The interest rate on these bonds will be paid on January 1 and July 1 every year. So investors will get the next interest rate of the RBI Floating Rate Savings Bonds on January 1, 2025.
Keep in mind that interest is taxable in the hands of the investors. You can not claim any tax deduction for investing in these bonds.
What is the tenure of RBI floating rate savings bond?
RBI floating rate bond has a lock-in period of seven years. There is no premature withdrawal option, but senior citizens get the option to prematurely withdraw money with a penalty after a minimum lock-in period. For those aged 60 to 70, the lock-in period will be six years. For those aged 70 to 80, the lock-in period will be five years. Those aged above 80 can withdraw their investment after four years from the date of investment.
RBI floating rate savings bond: What is the minimum and maximum investment?
The RBI floating rate savings bond have a minimum subscription amount of Rs 1,000 and in multiples of Rs 1,000, thereafter. There is no maximum limit. You cannot take loans against RBI Floating Rate Savings Bond 2020 (Taxable) bonds.
RBI floating rate bonds score low on liquidity as it has a lock-in period of seven years and only certain investors are eligible to withdraw the money prematurely. However, they are one of the highest-yielding debt instruments available in India at this moment. So anybody who has excess liquidity and does not need the money for seven years can invest in RBI floating rate bonds, the experts said.
