Due to market volatility and uncertainty, fixed income instruments are the next favorite investment option for people/ senior citizens and retirees.
Retirees/people constantly looking for fixed income instruments that can give them regular fixed income, RBI has launched RBI floating rate savings bonds 2020.
The central GOI has replaced 7.75% bonds with RBI floating rate savings bonds 2020 ( Taxable) scheme. These bonds are available from July 1, 2020.
This time these bonds will have a floating rate interest rate which will change periodically. This also means that the interest rate will change with time.
Table of Contents
RBI Floating Rate Savings Bonds 2020
Features of RBI Floating Rate Savings Bonds
Minimum Investment – Rs 1000
Maximum Investment – No Limit
Maturity Period – 7 year ( lock-in period)
Interest Rate – 7.15% as on July 2022
( interest rate will be set every six months)
Benchmark for interest rate – Prevailing NSC rate + 0.35%
Tax Benefit U/S 80 C – No
Tax Treatment – Interest amount is fully taxable
TDS -Yes (If an exemption under the relevant provisions of the Income Tax Act, 1961 is obtained, it may be declared in the Application Form.)
FAQs
Who issues these bonds?
These bonds are issued by RBI on behalf of Govt. of India.
Who can buy RBI Floating Rate Bonds?
Any Indian resident or HUF can buy the bonds.
The resident Indian can buy bonds in her or his individual capacity, or
- in individual capacity on joint basis, or
- in individual capacity on anyone or survivor basis, or
c on behalf of a minor as father/mother/legal guardian
(ii) a Hindu Undivided Family
Can NRI invest in these bonds?
No, NRI cannot invest in these bonds.
Where can I buy GOI Saving Bonds?
You can buy RBI Floating Rate savings Bonds from
- State Bank of India
- Bank OF Baroda( Including Dena Bank & Vijaya Bank)
- Bank OF India
- Bank OF Maharashtra
- Canara Bank( including Syndicate bank)
- Central Bank Of India
- Indian Bank( including Allahabad Bank)
- Indian Overseas Bank
- Punjab National Bank ( including Oriental Bank commerce & United Bank Of India)
- Union Bank of India( including Andhra Bank and Corporation Bank)
- UCO Bank
- Axis Bank Ltd
- ICICI Bank Ltd
- HDFC Bank Ltd
- IDBI Bank Ltd
The Bonds will be issued only in the electronic form and held at the credit of the holder in an account called Bond Ledger Account (BLA), opened with the Receiving Office.
Transferability
The bonds are not transferable. Transferability is limited to nominee(s)/legal heir in case of death of the holder.
Interest (Floating) Payment –
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 a cumulative basis.
The interest rate will be reset starting from Jan2021 and thereafter on every 1 July and 1 January.
Right now the first coupon rate is fixed @7.15%.
The interest rate in the future will be linked to NSC interest rate +0.35%.
When Interest will be paid
Interest is payable semi-annually from the date of the issue of bonds, up to 30th June / 31st December.
After this, the interest will be paid half-yearly on 1st July and 1st January respectively( as applicable).
Bank account details
It is mandatory for the investor to provide bank account details to facilitate payment of interest /maturity value directly to his/her/their bank account.
Nomination
The sole Holder or all the joint holders may nominate one or more persons as a nominee.
What if I want to withdraw before completion of 7 years
If you want to redeem before completion of 7 years than in special eligibility conditions apply.
If you are in the age bracket of 80 years or above, you can redeem after a Lock-in period of 4 years.
Age bracket 70 to 80 years, after lock-in period of 5 years and if you are in 60 to 70 years than you can withdraw after 6 years
#Penalty charges @ 50% of last coupon payment.
Collateral for availing loans
Tradability / Advances The bonds are not tradable in the secondary market and also not eligible as collateral for availing loans.
Where to Lodge complaint
You may lodge a complaint in writing in the form provided at the counter of the bank and address the same to the nearest office of Reserve Bank of India, as under:
THE REGIONAL DIRECTOR,
RESERVE BANK OF INDIA,
CONSUMER EDUCATION AND PROTECTION DEPARTMENT/ BANKING OMBUDSMAN (LOCATION)
You may also address your complaint to:
THE CHIEF GENERAL MANAGER
INTERNAL DEBT MANAGEMENT DEPARTMENT
RESERVE BANK OF INDIA,
23rd Floor CENTRAL OFFICE,
Shahid Bhagat Singh Marg,
MUMBAI-400 001
MAHARASHTRA
E- mail ID – cgmidmd@rbi.org
What if I do not withdraw after 7 years
Post Maturity Interest is not payable.
Should you invest in RBI Floating Rate Savings Bonds 2020?
Although RBI Floating Rate Savings Bonds 2020 looks very lucrative for regular income.
But if we compare saving bonds with other guaranteed options available than in case of senior citizens than Pradhan Mantri Vaya Vandana Yojana and Senior Citizen Saving Schemes scores over it.
Please note the interest rate in both the scheme is better than SCSS & PMVVY.
However, if you are not a senior citizen and if you are looking for regular payouts from RBI Floating rate Savings Bonds 2020 it is a good product.
Additionally please take note that bonds have Low liquidity ( withdrawal in between, before completion of 7 years), and Whatever interest you will get is fully taxable.
