Given the sharp fluctuations in the Indian market, most investors want guaranteed returns with low risk. For such investors, RBI Floating Rate Savings Bond (FRSB) can be a better option. The interest rate on these bonds is always kept 0.35% higher than the interest rate on National Savings Certificate (NSC).
For example, if NSC scheme gives 7% interest per annum, then FRSB will give 7.35% interest. Currently the interest rate on FRSB is 8.05% per annum. As the name suggests, this bond is based on floating rate. This means that the interest rate is changed every six months. This is directly related to the trend of the debt market. Although the fluctuations in this market are less.
Who is RBI Floating Rate Savings Bond better for?
- Those seeking secure, regular income: This bond is suitable for investors who want to avoid market risk and need regular income.
- Pensioners, Senior Citizens: This is a better option as a retirement plan for pensioners and senior citizens, because it earns interest every six months.
- Long Term Investors: FRSB is a good option for those who want fixed income in the long term.
How to buy RBI floating rate savings bonds? These bonds can be purchased from RBI retail direct website, banks' app/site, bank branch or post office. 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 years 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 penalty has to be paid.
- Government Guarantee: FRSB interest rates change every six months. If interest rates increase, you will get higher returns. Apart from this, this bond comes with government guarantee, so the risk is negligible.
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