RBI Floating Rate Savings Bonds 2024 - Latest Update
The Reserve Bank of India (RBI) has announced the latest interest rates for Floating Rate Savings Bonds (FRSB) 2020, effective from April 1, 2024. Here's everything you need to know about this popular investment option.
Current Interest Rate
The RBI Floating Rate Savings Bonds are currently offering an interest rate of 8.05% per annum, calculated on a half-yearly compounded basis.
The interest rate on these bonds is reset every six months (on January 1 and July 1) based on the prevailing National Savings Certificate (NSC) rates.
Key Features of RBI Floating Rate Savings Bonds
Interest Payment
- Interest is credited half-yearly on January 1 and July 1
- Interest is taxable as per your income tax slab
- No TDS is deducted at source
Investment Limits
- Minimum: Rs. 1,000
- Maximum: No upper limit
- Investment can be made in multiples of Rs. 1,000
Tenure
- 7 years from the date of issue
- Lock-in period for senior citizens: 6 years
- Lock-in period for others: Complete tenure
Note
Senior citizens (60 years and above) and super senior citizens (80 years and above) can avail premature redemption after 6 years from the date of issue.
Why Consider RBI Floating Rate Bonds?
Advantages
- Government Backing: 100% safe as they're backed by the Government of India
- Competitive Returns: Currently offering better returns than most fixed deposits
- Flexible Interest: Rate adjusts to market conditions every six months
- No Upper Limit: Invest as much as you want
Considerations
- Taxable Income: Interest is fully taxable
- Long Lock-in: 7-year commitment for most investors
- No Capital Gains: You only earn interest, no capital appreciation
Comparison with Other Options
| Investment Option | Current Rate | Lock-in Period | Tax Benefit |
|---|---|---|---|
| RBI Floating Rate Bond | 8.05% | 7 years | No |
| NSC | 7.7% | 5 years | Yes (80C) |
| Bank FD (SBI) | 7.1% | 5 years | Yes (80C) |
| Post Office TD | 7.5% | 5 years | Yes (80C) |
Who Should Invest?
RBI Floating Rate Savings Bonds are ideal for:
Risk-averse investors looking for guaranteed returns backed by the government
Senior citizens who need regular income and can benefit from the 6-year premature withdrawal option
Long-term investors who don't need liquidity for 7 years
High-income individuals who have exhausted their 80C limit but still want safe investments
If you're in a high tax bracket, calculate the post-tax returns. For someone in the 30% tax bracket, the effective return would be around 5.6% (8.05% - 30% tax).
How to Invest
You can purchase RBI Floating Rate Savings Bonds through:
- Designated banks (SBI, PNB, Bank of India, etc.)
- Post offices
- Online through internet banking (select banks)
Recent Trends
The interest rate on these bonds has been showing an upward trend:
- July 2023: 7.35%
- January 2024: 7.85%
- July 2024: 8.05%
The consistent upward revision of rates makes these bonds increasingly attractive for conservative investors seeking safety with decent returns.
— Market Analyst
Conclusion
RBI Floating Rate Savings Bonds continue to be an excellent option for risk-averse investors, especially senior citizens. The current rate of 8.05% is competitive, and the floating nature ensures you benefit from any future rate increases.
Key Takeaways
While the returns are attractive, remember that the interest is taxable. Calculate your post-tax returns based on your income tax slab before investing, and consider this as part of your overall fixed-income allocation.
