Floating Rate Savings Bonds by Reserve Bank of India
RBI Floating Fund- Taxable bond with no upper investment limit
The Indian government had launched RBI’s floating rate savings bond New Series - product in the year 2020. This fund is introduced for the Indian citizens/ HUF to invest in taxable bonds without worrying about upper limit investment. The interest rate on these bonds is linked to the National Savings Certificate (NSC). The interest rate is fixed @0.35% which higher than NSC rate, thus better future gains can be earned once invested.
Who are eligible to invest in floating savings bond?
RBI’s floating fund can be held by:
- Citizen residing in India
- Hindu Undivided Family (HUF)
Why should you invest in these bonds?
- Zero risk involved in the bond investment.
- Earned interest is payable (half-yearly) twice times in a year- January and July of every year.
- Interest rate is fixed based on existing NSC rate +0.35%
- 7 years fixed investment tenure. Early exit redemption available for Senior citizens.*
- Minimum investment is Rs.1000/-. No maximum limit.
- Non-tradable and Non-transferable.
*SPECIFIC CONDITIONS ON PREMATURE WITHDRAWAL FOR SENIOR CITIZENS
Minimum lock-in period from the date of issue as per investor’s age bracket:
|Age Bracket||Lock-in Period|
|60 to 70 years||6 years|
|70 to 80 years||5 years|
|Age of 80 years & above||4 years|
How to Apply for RBI Floating Fund Bond?
To apply for RBI bonds, you will have to
- Download the floating rate savings bonds application form
- Fill the application with the required details
- Draw a cheque or demand draft in the name of- “HDFC BANK FLOATING RATE SAVINGS BONDS, 2020” and crossed “Account payee only”
Courier the form to us at below address along with copy of your PAN card, Aadhar Card, Cancelled Cheque
Mutual Funds Department
Asit C. Mehta Investment Interrmediates Ltd.
Nucleus House, Saki Vihar Road, Andheri (E), 400072
How to subscribe to a floating rate savings bond?
An investor can subscribe to these bonds in the form of the cash upto Rs. 20,000/-, drafts/cheques or any electronic mode of payment is accepted at the receiving office.
In what form are the bonds issued to the investor?
The floating savings bonds are issued in electronic form and held in the investor’s account, called Bond Ledger Account (BLA). BLA can be opened with the receiving office/broker office.
Who is the receiving office that issues the bonds?
The receiving office is the branch of the State bank of India (SBI). From any branch of SBI,an investor can issue/subscribe to the floating savings bond. Other categories of receiving office are nationalized banks and four private banks:
- Axis Bank Ltd
- ICICI Bank Ltd
- HDFC Bank Ltd
- IDBI Bank Ltd
What is the nomination and cancellation process while investing in bonds?
Nomination and the cancellation process during bond investment will be as per the Government Securities Act 2006, (38 of 2006) and Government Securities Regulation, 2007, published in Part III, Section 4 of the Gazette of India, 1st December 2007.
The bondholder can nominate one or more persons as nominees according to the Government Securities Act 2006 provisions (38 of 2006).
Are bonds transferable?
No, the bonds are not transferable. It can be transferred to the nominee/legal heir in case of the bond holder’s death.
Explain the interests (floating rate) of the bonds.
- Option: Interest earned on the bonds is paid to the investors on a half-yearly, i.e., 1st January and 1st July every year.
- Rate: On every 1st January and 1st July, the coupon/interest rate of the bond will reset.
- Base Rate: The interest rate is linked with the existing national savings certificate (NSC) rate.
What is the maturity period for RBI floating bond?
The floating fund bond comes with a seven-year maturity period from the date of issue. Premature withdrawal is allowed for the specific senior citizen’s category.Besides specific senior citizen categories, penalty charges @50% from the last coupon payment are levied if an investor withdraws prematurely.
State the taxation scheme on the bonds.
Yes, theincome earned on the bonds is taxable. Tax is deducted from the principle amount while the interest is paid. If there’s any exemption done under provisions of the Income Tax Act, 1961, it can be declared in the application form.
Is it mandatory for the investor to have a bank account to invest in RBI floating fund?
Yes, it is mandatory to provide bank account details to facilitate the payment of interest/ maturity amount directly to the investor’s bank account.