In the current volatile financial landscape, where interest rates fluctuate and market conditions change rapidly, investors seek investment options that offer both stability and the potential for returns. The RBI Floating Rate Savings Bonds 2020, also known as RBI Bonds, have emerged as a popular choice for risk-averse investors seeking a safe and flexible investment avenue.
What are RBI Floating Rate Bonds?
RBI Floating Rate Savings Bonds are a type of government-issued bond that offers a variable interest rate linked to the National Savings Certificate (NSC) interest rate. The interest rate is reset every six months, on January 1st and July 1st, based on the prevailing NSC rate plus a spread of 0.35%. This means that as the NSC rate increases, the interest rate on the RBI Bond also increases, providing investors with the opportunity to earn higher returns in a rising interest rate environment. Current indicative yield of these bonds is 8.05%.
Key Features of RBI Floating Rate Bonds
- Tenure: The bonds have a maturity period of 7 years.
- Interest Rate: The interest rate is variable and linked to the NSC rate plus a spread of 0.35%.
- Interest Payment: Interest is paid semi-annually, on January 1st and July 1st each year.
- Minimum Investment: The minimum investment amount is ₹1,000, and investments can be made in multiples of ₹1,000.
- Maximum Investment: There is no maximum limit on investment.
- Eligibility: The bonds are available to resident Indian individuals and Hindu Undivided Families (HUFs).
- Taxation: The interest earned on the bonds is taxable as per the investor’s income tax slab.
Why Invest in RBI Floating Rate Bonds?
- Safety: RBI Bonds are backed by the Government of India, making them a very safe investment option.
- Regular Income: The bonds offer a regular stream of income through semi-annual interest payments.
- Flexibility: The floating interest rate provides protection against rising interest rates.
- Liquidity: Premature redemption shall be allowed for specified categories of senior citizens.
- No Risk of Default: The bonds carry no risk of default as they are backed by the sovereign guarantee of the Government of India.
Who Should Invest in RBI Floating Rate Bonds?
RBI Floating Rate Bonds are suitable for investors who:
- Seek a safe and stable investment option
- Want a regular income stream
- Are looking for protection against rising interest rates
- Have a moderate risk appetite
- Have a long-term investment horizon
How to Invest in RBI Floating Rate Bonds
The bonds can be purchased through designated banks and post offices, online platforms, and RBI Retail webiste. The application form can be downloaded from the RBI website or obtained from the bank/post office.
Conclusion
RBI Floating Rate Bonds are a reliable and flexible investment option that offers both stability and the potential for returns. With their attractive features and the backing of the Government of India, they are a good choice for investors looking to secure their financial future.
Disclaimer: This article is for informational purposes only and should not be considered as financial advice.
