RBI Floating Rate Savings Bonds (FRSB) pay an interest rate linked to the NSC rate + 35 bps — currently 8.05%. Interest paid half-yearly on 1 January and 1 July, 7-year tenure (5 years for senior citizens). No upper investment limit.
What is RBI Bonds?
RBI Floating Rate Savings Bonds 2020 (Taxable) are government-backed bonds issued by the Reserve Bank of India. The interest rate floats — set every six months at NSC rate + 0.35%. As of January 2024, the rate is 8.05% per annum. Minimum investment ₹1,000 in multiples; no upper limit (you can invest crores).
Tenure is 7 years (no premature withdrawal for general investors). Senior citizens (60+) can prematurely withdraw after a lock-in: 6 years for age 60-70, 5 years for 70-80, 4 years for 80+. Interest is paid half-yearly to the linked bank account, not reinvested.
How RBI Bonds interest works
The rate is reset every six months on 1 January and 1 July, linked to the prevailing NSC rate plus 35 basis points. Half-yearly interest is calculated on the principal at the prevailing 6-month rate and credited to your bank account.
Tax treatment: interest is fully taxable as income. TDS at 10% above ₹10,000 per year per investor (Section 193). Principal is NOT deductible under 80C — RBI Bonds are an income/safe-haven instrument, not a tax-saving one.
How to use this calculator
Enter investment amount
₹1,000 minimum, no upper limit. The lack of cap makes RBI Bonds ideal for parking large lump sums (PF withdrawal, property sale proceeds) at safe rates.
Confirm current rate
Currently 8.05% (NSC + 0.35%). Floats every 6 months. Check RBI Retail Direct portal for the latest.
Read the half-yearly + total returns
Calculator shows half-yearly interest you'll receive plus 7-year cumulative (assuming rate stability — actual will vary as the floating rate resets).
When to use it
Parking large retirement lump sums
EPS commutation, PF withdrawal, property sale proceeds — all can be substantial 6-figure or 7-figure amounts that don't fit ₹30L SCSS or ₹9L POMIS caps. RBI Bonds with no upper limit are the natural home for such corpus.
Senior citizen safe-yield core
For 60+ retirees, RBI Bonds combine high safety (sovereign backing), high yield (currently 8.05%), and partial-withdrawal flexibility (5-6 year lock vs 7 for general). Better than most fixed deposits at the same risk level.
Hedge against falling FD rates
Since RBI Bond rate floats with NSC, it benefits from rate increases when the RBI hikes. Bank FDs are typically fixed — RBI Bonds provide upside in a rising-rate environment.
Common mistakes to avoid
Comparing 8.05% headline against tax-free PPF directly
RBI Bond 8.05% is fully taxable. At 30% slab, post-tax is ~5.6%. PPF at 7.1% is tax-free, equivalent to ~10% pre-tax. PPF wins on post-tax yield for high-bracket investors despite the lower headline rate.
Locking emergency money in 7-year RBI Bonds
No premature withdrawal for general investors. Keep emergency fund separately liquid (sweep FD, liquid funds); RBI Bonds are for money you genuinely don't need for 7 years.
Frequently asked questions
What's the current RBI Bond rate?
Are RBI Bonds tax-free?
What's the minimum and maximum investment?
Can I withdraw RBI Bonds before maturity?
RBI Bonds vs bank FDs — which is better?
How do I buy RBI Bonds?
References
- RBI Floating Rate Savings Bonds 2020 — RBI press release— Reserve Bank of India
- RBI Retail Direct — buy government bonds online— Reserve Bank of India