What are Floating Rate Saving Bonds (FRSB) 2020 issued by RBI
RBI Floating Rate Savings Bonds 2020 are fixed-income instruments issued by the Government of India. They offer pre-determined interest rates that are reset … These bonds provide a stable and attractive return for investors seeking a risk-free investment avenue. Key Features of FRSBs: Floating Interest Rate: The interest rate on FRSBs is not fixed but fluctuates based on the prevailing National Savings Certificate (NSC) rate, with a 35 basis point (bps) spread. This means that the interest rate adjusts periodically, ensuring your returns remain competitive with market trends. Taxable: The interest earned on FRSBs is taxable under the Income Tax Act, 1961. Long-Term Investment: FRSBs have a tenure of 7 years, making them suitable for long-term investment goals. Minimum Investment: The minimum investment amount is ₹1,000, with no upper limit. No Premature Withdrawal (Generally): While premature withdrawal is generally not allowed, certain exemptions may apply for senior citizens. Safety and Security: Backed by the Government of India, FRSBs offer a high degree of safety and security for investors. How FRSBs Work: Interest Rate Mechanism: The interest rate on FRSBs is reset twice a year, typically on January 1st and July 1st. The new rate is determined by adding a 35 bps spread to the prevailing NSC rate. Interest Payments: Interest is paid semi-annually, usually on January 1st and July 1st. Maturity: At the end of the 7-year tenure, the principal amount invested is repaid to the bondholder. Who Can Invest in FRSBs? Individuals (including joint holdings) Hindu Undivided Families (HUFs) Minors (invested on their behalf by parents/guardians) Benefits of Investing in FRSBs: Competitive Returns: The floating interest rate mechanism ensures that your returns remain competitive with market interest rates. Safety and Security: Backed by the Government of India, FRSBs offer a high degree of safety and security. Long-Term Investment: Suitable for long-term financial goals. Simple and Easy to Invest: The investment process is straightforward and can be done through various channels. Conclusion: RBI Floating Rate Savings Bonds offer a secure and attractive investment option for individuals and HUFs seeking a stable and long-term investment avenue. The floating interest rate mechanism ensures that your returns remain competitive, while the government backing provides a high level of safety and security.