Given the sharp volatility in the Indian market, most investors want guaranteed returns with less risk. RBI Floating Rate Savings Bond (FRSB) can be a better option for such investors. The interest rate on these bonds is always kept 0.35% higher than the interest rate on National Savings Certificate (NSC).
For example, if the NSC scheme pays 7% interest per annum, the FRSB will pay 7.35% interest. FRSB currently carries an interest rate of 8.05% per annum. As the name suggests, these bonds are based on floating rates. This means that the interest changes every six months. This is directly related to the trend of the debt market. However, the volatility in this market is low.
Who is RBI Floating Rate Savings Bond better for?
- To earn a secure, regular income: These bonds are suitable for investors who want to avoid market risk and need regular income.
- Pensioners, Senior Citizens: It is a better option as a retirement plan for pensioners and senior citizens, as it earns interest every six months.
- Long Term Investors: FRSB is a good option for people who want fixed income for long term.
How to buy RBI Floating Rate Savings Bond? These bonds can be purchased from RBI's Retail Direct website, banks' apps/sites, bank branches or post offices. PAN is required, minimum investment is ~1000 and maximum investment is unlimited.
- Lock-in period of 7 years: These bonds cannot be redeemed before 7 years. However, investors aged 60-70 can do premature redemption after 6 years. Investors aged 70-80 years can do premature redemption after 5 years and investors above 80 years can do premature redemption after 4 years. But the fine will have to be paid.
- Government Guarantee: FRSB interest rates change every six months. If the interest rate increases, you will get more returns. Apart from this, these bonds come with a government guarantee, so the risk is negligible.
Image Credit: (Divya-Bhaskar): Images/graphics belong to (Divya-Bhaskar).
