RBI Bonds - Nishith Dalal

RBI Floating Rate Savings Bond

RBI Floating Rate Bond refers to a type of government bond issued by the Reserve Bank of India (RBI) where the interest rate on the bond is not fixed, but instead, it fluctuates with changes in the benchmark interest rate. The interest rate on these bonds is reset periodically, usually every six months or one year, based on the prevailing market rates.

Some of the Key Features of RBI Floating Rate Bonds are as follows:

Protection against inflation:

Since the interest rate on these bonds is linked to the benchmark interest rate, the returns on these bonds are adjusted automatically to reflect changes in the market interest rates. This means that investors can earn higher returns during periods of high inflation.

Low-risk investment:

Like other government securities, RBI Floating Rate Bonds are considered a low-risk investment option as they are backed by the Government of India. The repayment of the principal and interest is guaranteed by the government.

Returns:

The interest rate on floating-rate bonds is currently 7.35% (subject to semi-annual reset).

Tax Treatment:

The interest on these bonds is fully taxable. There is no deduction on the principal investment.

Liquidity:

These bonds are not listed and traded and you cannot take loans against them. You are effectively locked in for a tenure of seven years.

Invest in RBI bonds is a hassle-free process with us.

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