RBI keeps interest rate on floating rate savings bonds unchanged at 8.05%

The Reserve Bank of India has announced the interest rate for its Floating Rate Savings Bonds (Taxable) – FRSB 2020 (T) for the January 1 to June 30, 2025 period. The interest rate for this half-year will remain at 8.05 per cent, which is the sum of the National Savings Certificate (NSC) rate of 7.70 per cent and an additional spread of 0.35 per cent.

 

The interest rate on RBI floating-rate savings bonds is not fixed and is adjusted twice a year. The rate is linked to the interest rate of the NSC, meaning if the NSC rate increases, the interest on the RBI floating-rate savings bond will also rise, and vice versa. Interest payments are made semi-annually, on January 1 and July 1 each year.

 

“The coupon rate on FRSB 2020 (T) for the period January 01, 2025 to June 30, 2025, and payable on July 1, 2025, remains at 8.05 per cent (7.70 pe cent+0.35 per cent), unchanged from the previous half-year,” RBI said in a press release on Wednesday.

 

The interest earned on these bonds is subject to taxation, and investors cannot claim any tax deductions for their investments in these bonds. Additionally, Tax Deducted at Source (TDS) will be applicable if the annual interest surpasses Rs 10,000.

 

The RBI Floating Rate Savings Bond requires a minimum subscription of Rs 1,000, with additional investments made in multiples of Rs 1,000. There is no upper investment limit. However, these bonds cannot be used as collateral for borrowing.

 

The RBI Floating Rate Bond has a standard lock-in period of seven years with no premature withdrawal option. However, senior citizens are allowed to withdraw prematurely with a penalty after completing a minimum lock-in period. The lock-in period varies by age - six years for individuals aged 60 to 70, five years for those aged 70 to 80, and four years for those above 80.