uTrade AlgosFloating Rate Savings Bond
What is a Floating Rate Savings Bond (taxable)?
FRSBs are taxable bonds that the RBI released in July 2020 and are thought to be a successor for its previous Risk-Free 7.75% Bonds, which the RBI cancelled in May 2020. These feature a variable rate of interest, which means that it will fluctuate over the bond’s term and reset every six months. The current national saving certificate (NSC) rate and the FRSB rate are linked, and the FRSB rate will be +0.35% over the NSC rate. For the date of January 1, 2023, to June 30, 2023, which is payable on July 1, 2023, the interest rate on FRSBs has been fixed at 7.35% per annually payable half-yearly.
Features of RBI Floating Rate Savings Bonds
Following are the key features of the RBI floating rate bond.
The application for RBI Bonds is available online and is attached to the Bond Ledger account.
An RBI Bond matures after 7 years. Although the maturity period is 7 years, a return request can be made at any time. However, the same is subject to a fine.
The secondary market is not open for the trading of these bonds. RBI Bonds are not acceptable as loan collateral.
These bonds cannot be transferred once they are owned. This suggests that a person cannot give another person the title of an RBI Bond.
Eligibility Criteria for Investing in a Floating Rate Savings Bonds
The following investors meet the requirements to purchase RBI Bonds:
- The investor must reside in the nation (India).
- The buyer of the bond may be a major purchasing it in his or her own name or purchasing it on behalf of a minor.
- One must be capable of making the investment on their own or with others.
- A Hindu undivided family might potentially be the investor.
- NRIs, or non-resident Indians, are not permitted to invest in these bonds.
RBI Floating Rate Savings Bond Interest Rates
The RBI Floating Rate Bonds’ current or most recent interest rate (2023) is 7.35% annually. The interest rate on RBI Floating Savings Rate Bonds (FRSB) is calculated using a set formula. The interest rate has a range of +35 basis points, or 0.35%, above the applicable National Savings Certificate (NSC) rate, and is tied to or fixed to that rate.
In December 2022, the NSC rates will be fixed at 7.00%. The rate of interest on the Reserve bank’s Floating Rate Savings Bonds will be 7.35% after adding the +35 basis points spread. In this manner, RBI Floating Interest is determined.
Taxation of RBI Floating Rate Savings Bonds
The RBI released new “Floating rate savings bonds” on June 26, 2020, which will be available starting July 1, 2020, following the discontinuation of its 7.75% fixed interest rate bonds on May 28, 2020.
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