RBI FRB 2034 interest rate jumps to 7.26%: How much more will investors earn?
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RBI hikes FRB 2034 interest rate to 7.26%: How much can you earn on Rs 5 lakh?
The Reserve Bank of India (RBI) has increased the interest rate on Government of India Floating Rate Bond 2034 (FRB 2034) by 0.81 percentage points, from 6.45% to 7.26% per annum.
The revised rate will apply for the six months from October 30, 2026, to April 29, 2027. Launched in January 2022, FRB 2034 offers investors a variable interest rate that is revised periodically.
The revised rate will apply for the six months from October 30, 2026, to April 29, 2027. Launched in January 2022, FRB 2034 offers investors a variable interest rate that is revised periodically.
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FRB 2034 interest rates over the last four years
The table above shows FRB 2034 interest rates over the last four years.
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Why has RBI increased the FRB 2034 interest rate?
The RBI attributed the bond rate hike to an increase in the weighted average yield (WAY) of 182-day Treasury Bills (T-Bills). The coupon rate is calculated using the average WAY of the last three T-Bill auctions, plus a fixed spread of 0.98%. For FRB 2034, the rate-fixing date was October 30, 2026, the RBI said in its October 29 statement.
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182-day T-Bill yields used for FRB 2034 rate revision
The last three 182-day T-Bill auctions recorded the following yields:
● October 28, 2026: 6.5140%
● October 14, 2026: 6.2563%
● October 7, 2026: 6.0645%
The RBI uses the average yield of these three auctions to determine the base rate for FRB 2034.
● October 28, 2026: 6.5140%
● October 14, 2026: 6.2563%
● October 7, 2026: 6.0645%
The RBI uses the average yield of these three auctions to determine the base rate for FRB 2034.
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How did FRB 2034 interest rate reach 7.26%?
The revised interest rate is calculated by taking the average yield of the last three 182-day T-Bill auctions and adding the fixed spread of 0.98 percentage points.
● Average of the three auction yields: 6.28%
● Fixed spread: 0.98%
● Revised FRB 2034 interest rate: 7.26%
● Average of the three auction yields: 6.28%
● Fixed spread: 0.98%
● Revised FRB 2034 interest rate: 7.26%
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How much will you earn on Rs 5 lakh investment in FRB 2034?
Suppose you invested Rs 5 lakh in FRB 2034. Here is how the six-monthly interest payout changes:
● At the earlier 6.45% rate: approximately Rs 16,125
● At the revised 7.26% rate: approximately Rs 18,150
● Additional interest: Rs 2,025
The higher coupon increases the six-monthly payout. However, the amount may change after the next rate revision in April 2027.
● At the earlier 6.45% rate: approximately Rs 16,125
● At the revised 7.26% rate: approximately Rs 18,150
● Additional interest: Rs 2,025
The higher coupon increases the six-monthly payout. However, the amount may change after the next rate revision in April 2027.
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What are RBI floating rate bonds?
Floating Rate Bonds (FRBs) do not offer a fixed coupon rate throughout their tenure. Instead, their interest rate is revised at pre-announced intervals, such as every six months or one year. The coupon can comprise a base rate determined through an auction mechanism and a fixed spread. While the base rate changes periodically, the fixed spread remains unchanged throughout the bond's tenure.