RBI Floating Rate Savings Bonds may offer 8.05% interest from July 1: Details here

RBI Floating Rate Savings Bonds: The interest rate is linked to the National Savings Certificate (NSC)- small savings scheme backed by the Union government.

RBI Floating Rate Savings Bonds currently offer an interest rate of 8.05% per annum. But the interest rate of RBI Floating Rate Savings Bonds 2020 (Taxable) is not fixed as it is reset every six months. This is due on July 1 this year. 

RBI Floating Rate Savings Bonds: NSC's interest rate is reviewed every quarter and when the interest rate of NSC goes up, interest rate of RBI Floating Rate Savings Bonds also rises.(Representational)

What is the relationship between RBI Floating Rate Savings Bonds and NSC interest rates?

The interest rate is linked to the National Savings Certificate (NSC)- small savings scheme of the Union government which means that the interest rate of RBI Floating Rate Savings Bonds is 0.35% higher than what NSC gives. NSC's interest rate is reviewed every quarter and when the interest rate of NSC goes up, interest rate of RBI Floating Rate Savings Bonds also rises.

What is NSC's current rate? Does this mean RBI Floating Rate Savings Bonds interest will rise?

Currently, NSC offers an interest rate of 7.7% for the April-June quarter which means that RBI Floating Rate Savings Bond 2020 (Taxable) will continue to have a high interest rate of 8.05% from July 1 for the next six months.

RBI Floating Rate Savings Bonds: All you need to know

1. RBI Floating Rate Savings Bonds 2020 (Taxable) are issued by the Reserve Bank of India. 
2. They come with a lock-in period of seven years and the interest rates are reset twice in year. 
3. Investors will get the interests semi-annually- January 1 and July 1 every year. 
4. The interest is taxable and you can not claim any tax deduction for investing in these bonds.
5. There is no premature withdrawal option but senior citizens can prematurely withdraw money with a penalty after a minimum lock-in period.