RBI Floating Rate Savings Bond 2024
By Team CodeForBanks | April 20, 2024
RBI Floating Rate Savings Bonds 2020 (Taxable) are fixed-income instruments which are issued by the Government of India at pre-determined interest rates. RBI FRSB 2020 (T) offer a secure and safe investment opportunity to the customers, presently providing 8.05% p.a. interest. RBI Floating Rate Savings Bonds interest rate is linked to National Savings Certificate (NSC). This investment has a low-risk and high returns. It is suitable for,
- Risk-averse investors
- Who want periodic returns in their investment
- Investors seeking higher assured returns from a lump-sum investment
- Investor who have no problem with lock in period
- Who want a long-term investment option with fixed income
Interest rate on RBI savings bonds has been increased from 7.35% to 8.05% until Dec 31, 2023.
Highlights of RBI Floating Rate Savings Bonds 2024
| Interest Rate | 8.05% per annum, interest rate is linked to National Savings Certificate (NSC) |
| Eligibility | Resident Individuals & HUF |
| Investment | Minimum Rs.1000 & No maximum limit |
| Maturity | 7 Years from Bond Issue |
| Interest Payment | Interest payable half-yearly in 1st January and 1st July each year |
| How to Apply? | Online or Offline |
Why to Invest in RBI Floating Rate Savings Bond 2024?
- 100% risk-free investment with capital safety
- High interest rate
- Minimum investment of just Rs.1,000
- Regular Income with half-yearly interest payout
- You can invest online or offline
Features: RBI FRSB 2020 (T)
RBI Floating Rate Savings Bonds 2020 (Taxable) comes up with following major features.
- Non Tradable & non Transferable
- Nomination facility is available
- Premature withdrawal for senior citizens with some specific conditions
- Bonds are not eligible as collateral for availing loans from Banks, Financial Institutions & Non-Banking Companies
- FRSB 2020 (T) is issued only in the electronic form called 'Bond Ledger Account (BLA)'
- Liquidity is offered twice a year through half yearly interest payouts
Eligibility Criteria for RBI FRSB 2020 (T)
Eligible investor categories for RBI floating rate savings bond are tabled below,
| Eligibility | Investment |
|---|---|
| Resident Individual |
|
| Hindu Undivided Family | HUF can invest |
Note that NRIs are not eligible for investment in RBI floating rate savings bond.
Documents Required: RBI FRSB 2020 (T)
Following document are required for making investment in RBI floating rate savings bond,
- Duly filled application form
- A cancelled blank cheque
- Investment amount
- KYC (Know Your Customer) documents which will include,
- Proof of address: Aadhaar card, Passport, Recent Utility Bills, Driving license, Voter's ID card, Job card issued by NREGA signed by the State Government officer, etc.
- Proof of identity: Aadhaar card, PAN Card, Passport, Driving license, Voter's ID card, Job card issued by NREGA signed by the State Government officer, etc.
- PAN Card (PAN is mandatory)
How to Apply for RBI Floating Rate Savings Bond 2024 through Retail Direct Portal?
As per the RBI circular dated October 23, 2023, now retail investors can access a more diverse spectrum of investment instruments through the Retail Direct Portal. Earlier, investment in RBI Floating Rate Savings Bond was available only at any branches of SBI, nationalised banks, private sector banks (specified by the RBI) and any other entity as authorised by the Reserve bank of India, according to the guidelines released by the government in June 2020 on RBI Floating Rate Savings Bond.
Individual who is a retail investor is permitted to open an RDG account. RBI FRSB 2020 (T) can be subscribed on the Retail Direct (RDG) portal on all working days excluding 2nd and 4th Saturdays, Sundays and Public Holidays under Negotiable Instruments Act 1881 for the State of Maharashtra.
Investment
| Investment | Amount |
|---|---|
| Minimum Investment | Rs.1000 |
| Additional Investment | In multiples of Rs.1000 |
| Maximum Investment | No Limit |
Note that the investment in the RBI Floating Rate Savings Bonds can be made in cash upto Rs.20,000 only. More than this amount is accepted via drafts, cheques or electronic mode (NEFT/RTGS).
Interest Rate under RBI FRSB 2020 (T)
- Type of Interest Rate: Floating Rate of Interest
- Change in Interest Rate: It is subject to change in January & July each year.
- Linkage with NSC: Interest Rate is linked to National Savings Certificate (NSC). Bond will always pay 0.35% higher than NSC rate.
- Periodicity of Interest Payment: Interest is payable semi-annually from the date of issue of bonds up to 30th June or up to 31st December, as the case may be
- Annual Interest Payment: Interest payable half-yearly in 1st January and 1st July each year
- No interest will accrue after the maturity of the bond
These bonds come with a fixed coupon rate as set by the GOI from time to time. For example, if you buy a bond of Rs.10000 with a coupon rate of 8%. In the case of such a bond, you will be paid an annual interest amount of Rs.800.
Interest rate has been re-set half yearly starting with January 1st, 2021 and thereafter every July 1st and January 1st and is linked with the prevailing National Saving Certificate (NSC) rate with a spread of (+) 35 bps (or 0.35%) over the respective NSC rate.
The coupon rate on FRSB 2020 (T) for period October 30, 2023 to April 29, 2024 will be 8.05% (7.70% + 0.35% i.e. 8.05%). All subsequent coupon rates would be based on the fixation of rate of interest on NSC on January 01 and July 01 accprding to same methodology.
Maturity: RBI FRSB 2020 (T)
Maturity is 7 years from Investment date. Premature withdrawal for Senior Citizens.
No interest will accrue after the maturity of the bond.
Premature withdrawal is allowed for specified categories of senior citizens only.
Premature Withdrawal for Senior Citizens: RBI FRSB 2020 (T)
Premature withdrawal is allowed for investors above 60 years of age subject to minimum lock-in period depending on the age of the investor. Minimum lock-in period from the date of issue as per Investor age bracket is mentioned in the below table, such persons can withdraw it after the lock in period and before its maturity period of 7 years from the date of investment.
| Age Bracket | Lock-in Period |
|---|---|
| For customers in the age bracket between 60 to 70 years | 6 years |
| For customers in the age bracket between 70 to 80 years | 5 years |
| For customers in the age bracket of 80 years and above | 4 years |
Taxability
The interest income from the bonds is taxable under the Income-tax Act, 1961, as applicable, according to the relevant tax slab of the Bonds holder(s). TDS (Tax Deducted at Source) is deducted at the time of interest payment as per the prevailing IT rules. However, there is no deduction on the principal investment.
Investment in RBI FRSB is exempt from wealth tax under the Wealth Tax, 1957.
Tax Deduction at Source (TDS) on RBI Floating Rate Savings Bonds
Tax will be deducted at source while making payment of interest on the Bonds. However, if an exemption under the relevant provisions of the Income Tax Act, 1961, as amended from time to time, is obtained and declared by the investor, exemption from TDS can be availed.
How to Apply Offline for RBI Floating Rate Savings Bonds?
If you want to invest in RBI FRSB through offline route, you can do so. Further, in case of online application, neither joint account nor minor applicant is permitted. So when you want your mode of holding to be joint or you want to invest on behalf of a minor, you need to go for an offline option only.
- Step 1: Visit your bank branch
- Step 2: Obtain the application form for RBI Floating Rate Savings Bonds
- Step 3: Fill out the form completely by providing your personal details
- Step 4: Choose the amount to invest
- Step 5: Choose the interest payment option
- Step 6: Submit the application along with your Know Your Customer (KYC) documents. Your KYC (Know Your Customer) is essential while making savings bond investments. These will include,
- Proof of address
- Proof of identity
- PAN Card
- Step 7: Deposit the amount
- Step 8: Get the acknoledgement slip
- Step 9: A certificate of holding will be issued to the customer as proof of subscription
Note that the contribution to the bonds can be made in cash (upto Rs.20,000 only). More than this amount is accepted via drafts, cheques or electronic mode (NEFT/RTGS).
Options for Interest Payment: RBI FRSB 2020 (T)
RBI FRSB offers you one option with regard to interest payment.
Non Cumulative Option: You can opt for receiving a regular interest income till maturity in which the interest is paid out in every 6 months. The interest on the bonds is payable semi-annually on 1st Jan and 1st July every year.
These bonds do not offer to pay interest on a cumulative basis.
How to Invest in RBI Floating Rate Savings Bonds with HDFC Bank?
You can invest in RBI Floating Rate Savings Bonds, 2020 with HDFC Bank online through netbanking. Please note that investments via netbanking are only available for Singly Held Savings Accounts.
- Step 1: Login to HDFC Bank NetBanking using your login credentials
- Step 2: Go to "Accounts" section
- Step 3: Select "Accounts Summary" option
- Step 4: Choose "Transact"
- Step 5: Select "Invest in RBI Bonds" and fill up the application form and make the investment online
FAQs on RBI Floating Rate Savings Bonds
What Documents are required for investment under RBI FRSB 2020 (T)?
Application Form, KYC Documents (Id & Address proof as per Bank Guidelines), one cancelled cheque and contribution for investment.
What is the maturity period of RBI FRSB 2020 (T)?
Maturity of the bond will be on the expiration of 7 years from the date of issue.
Is investment in RBI FRSB 2020 (T) transferable, if yes then under which condition?
Investments in FRSB 2020 (T) is not transferable. It is allowed to be transferred to a nominee(s)/legal heir, only in case of death of the holder of the bonds.
Is investment in RBI FRSB 2020 (T) tradable?
FRSB 2020 (T) is not tradable in the secondary market.
Will premature withdrawal be permitted for RBI FRSB held in joint holding, if any of the individual is above 60 years of age?
Yes. If RBI FRSB held in joint holding, the lock in period will be applicable, even if any one of the holders fulfils the conditions of eligibility.
Which authority provides customer service for RBI Floating Rate Savings Bonds?
CCIL through which the bonds have been purchased is the authority to provide customer services for all the issues related to RBI Floating Rate Savings Bonds such as premature withdrawl, change of address/ nomination, grievance redressal, investment discrepancy, etc.
Is investment in RBI FRSB 2020 (T) eligible as collateral?
No. RBI FRSB 2020 (T) is not eligible as collateral for availing loans.
Where are applications for the RBI FRSB 2020 (T) Bonds in the form of Bond Ledger Account accepted?
Applications for the Bonds in the form of Bond Ledger Account will be received in the designated branches of SBI, Nationalised banks, IDBI Bank Ltd, Axis Bank Ltd, HDFC Bank Ltd and ICICI Bank Ltd.
How the penalty is calculated in case of premature withdrawal?
50% of interest due and payable for the last 6 months of the holding period will be recovered in case of premature withdrawal.