RBI Bonds 2023 Investment
In this article, we will look at the features of the newly launched RBI Bonds 2023 in detail and whether you should invest in them. RBI Bonds are also known as Floating Rate Savings Bonds.
The government of India has announced the again launch of the floating rate savings bonds scheme. This bond was launched after 7.75% taxable savings bonds were withdrawn in May 2020.
The government came with a new offering, which is a 7-year bond, which will be open for subscription from July 1, 2020, though retains many of the features of its predecessor, has changed the terms and conditions of payment of interest to the investors.
The Interest rate on RBI Bonds 2023 for the period January 1, 2023, to June 30, 2023, and payable on July 1, 2023, has been reset at 7.35% (7%+0.35%= 7.35%).
Now, let’s look at the features of RBI Bonds in further detail.
1- A person resident in India,
A - in her or his individual capacity, or
B - in individual capacity on joint basis, or
C - in individual capacity on any one or survivor basis, or
D - on behalf of a minor as father/mother/legal guardian
2- A Hindu Undivided Family
Note - Non-Resident Indians (NRI)s are not eligible to invest in these bonds.
|Minimum investment |
Minimum ₹ 1000/- and in multiples of ₹ 1000/-.
|No Maximum limit|
1- Option – The interest on the bonds will be payable at half yearly intervals on Jan 1st and July 1st every year. There is no option to pay interest on cumulative basis.
2- Rate – The coupon/interest of the bond would be reset half yearly starting with Jan 1st, 2021 and thereafter every July 1st and Jan 1st. The coupon rate for first coupon period, payable on January 1, 2021 is fixed at 7.15%.
3- Base Rate – The coupon rate will be linked/pegged with prevailing National Saving Certificate (NSC) rate with a spread of (+) 35 bps over the respective NSC rate.
Income from the bonds is taxable.
Tax will be deducted at source while interest is paid.
If an exemption under the relevant provisions of the
Income Tax Act,1961 is obtained, it may be declared in the Application Form.
The Bonds held to the credit of Bond Ledger Account (BLA) of an investor shall not be transferable, except transfer to a nominee(s)/legal heir in case of death of the holder of the bonds.
7 years from the date of issuance.
The sole Holder or all the joint holders may nominate one or more
persons as nominee in accordance with the provisions of the
Government Securities Act, 2006 (38 of 2006) and the Government
Securities Regulation, 2007, published in Part III, Section 4 of the
Gazette of India dated December 1, 2007.
Subscription to the bonds will be in the form of cash (upto ₹20,000/- only)/drafts/cheques or any electronic mode acceptable to the Receiving Office.
*Premature redemption shall be allowed for specified categories of senior citizens.
Facility is available to the eligible investors after Lock in period of 4, 5,
and 6 years in the age bracket of 80 years and above, between 70 to
80 years and 60 to 70 years respectively.
Penalty charges @ 50% of last coupon payment.
|Post Maturity Interest|
Post Maturity Interest is not payable.
|Loan Facility |
RBI Bonds Rate of Interest
The attractive feature of the Bonds is higher interest rates (7.35%)
The interest rates are re-set half-yearly, & the current interest rate on the Bonds is higher as compared to NSC (currently 6.8%), FD with Banks, and Public Provident Fund (currently 7.1%).
The interest on the floating bonds is payable semi-annually on 1st Jan and 1st July every year.
The Bonds will be issued in non-cumulative form only.
Why Should I Invest in RBI Bonds 2023?
Let’s discuss the pros associated with RBI floating savings bonds:
Floating Rate Savings Bonds are risk-free as it is offered by the GOI (Government of India).
the Bonds provides another investment option for the risk averse investors and for investors seeking to diversify their portfolio.
|Fixed & Regular Income|
The Investors will receive a periodical & regular income from the Bonds in form of interest pay-outs.
This leaves the Investors a option to use their income, either for savings or for consumption.
|Floating Rate System|
The interest rate is based on the floating rate system.
The RBI bonds ensures that the investors receive interest based on the interest rates in the market or rather the interest rate being offered on NSC.
In a condition rising interest rates, the advantage can be expected to be passed on to the investors but,
remember the interest reset period is six months & the rate of interest will increase only when the NSC rate increases.
How to Buy RBI Bonds Online?
The RBI has allowed SBI & Associates, Nationalised Banks, and 11 other Public Sector banks ( ICICI, HDFC, Axis, etc.) to accept the application for Floating Rate Savings Bonds.
The application for these bonds can either be made online or offline.
Subscription to the bonds will be in the form of cash (up to ₹20,000/- only)/drafts/cheques or any electronic mode acceptable to the Receiving Office.
RBI Bonds Application Form
Downside of Bonds
|Floating Interest Rate|
Since the Bonds carry a floating interest rate system & the interest rates are reset periodically, the investors are exposed to the interest rate risk.
In the current times of COVID 19 impact and expectations of low growth, the interest rate risk is expected to stay for a while.
The Bonds do not carry any sort of tax benefits, either in the form of deduction under section 80c of the income tax act, or any exemptions for the interest income from the Floating Rate Savings Bonds.
The lack of tax advantage for the RBI Bonds makes it relatively less attractive for the tax paying investors.
The interest from the Floating Rate Savings Bonds is paid out periodically to the investors, Therefore cumulative interest option is not applicable.
The investors may lose out on the compounding effect of the interest amount that is paid out to the investors.
Premature withdrawal option is not applicable for every investor and the investors cannot avail any loans from financial institutions with the RBI Bonds as collateral.
RBI Bonds for Senior Citizens
Special privilege has been given to senior citizens in this bond,
They may take a premature exit after 4, 5, and 6 years based on age group.
Otherwise, the interest due for the six months immediately preceding the exit is deducted, in case someone takes the premature exit.
|Age Group||Premature Redemption|
|80 years and above||4 Year|
|Between 70 to|
|60 to 70 years||6 Year|
You may address your complaint to:
The Chief General Manager
Internal Debt Management Department
Reserve Bank Of India, 23rd Floor
Central Office, Shahid Bhagat Singh Marg,
Email ID – firstname.lastname@example.org
Few Things to Look at Before Buying Bonds
Firstly, RBI bonds are not eligible for trading in the secondary market in India and can’t be used as a guarantee for loans from banks or financial institutions.
Secondly, A only holder or an only surviving holder of a bond, being an individual, can make a nomination.
Thirdly, and most importantly, The bonds in the form of BLA shall not be transferable except transferred to a nominee (s) in case of death of the bondholder.
Is FD Better than Bonds?
Frequently Asked Questions
Interest to the subscriber opting will be paid from the date of issue up to 30th June or 31st December as the case may be, and thereafter half-yearly for the period ending 30th June and 31st December on 1st July and 1st January.
Interest on Bonds held to the credit of the Bonds Ledger Account of an investor will be paid, electronically by credit to the bank account of the subscriber as per the option exercised by the investor.
Yes. In the case of joint holders or more than 2 holders of the RBI Bond, the above lock-in period will be applicable even if any one of the holders fulfills the above conditions of eligibility.
The 50 percent of the interest due and payable for the last 6 months of the holding period will be recovered in such cases,
Tax will be deducted at the source while making payments from time to time.
Interest on the Bonds will be taxable under the IT Act, 1961 as applicable according to the relevant tax status of the Bondholders.
The RBI Bonds held to the credit of the Bonds Ledger Account of an investor shall not be transferable.
With so much unpredictability around, it is quite natural that we become additional cautious with your money. So these floating rate savings bonds might look like a fine option now, but recall your money will be locked for seven years plus. And you don’t get any tax benefits. So before going for them, surmise whether they fit well into your portfolio or not. That should be the deciding factor.