What is the interest rate on RBI floating rate bonds?

The Floating Rate Savings Bonds of the Reserve Bank of India are issued by the Indian Government. Investors can purchase the Floating Rate Savings Bonds 2020 from private or public sector lenders.

To borrow money from the public, financial institutions, businesses, and governments issue floating rate bonds. As opposed to standard regular bonds that have a fixed interest rate, floating rate bonds have an interest rate that is tied to a predefined benchmark rate and is periodically reset.

What is the RBI floating rate bond interest rate

These bonds' interest rates are tied to the rate of the post office’s small saving scheme, the National Savings Certificate (NSC). These variable rate bonds will earn 0.35 percent more than the current NSC rate, according to scheme instructions published on June 26, 2020.
At present, the RBI floating rate bond carries a 7.15 percent interest rate. The current NSC interest rate is 6.8 percent, plus 0.35 percent, which equals a 7.15 percent annualised interest rate. The interest rates on these bonds is reset/previewed every six months.

The government evaluates the NSC interest rate every three months. According to the Shyamala Gopinath Committee's calculation, the interest rates for various schemes should be 0.25 to 1% greater than the yields of government bonds with comparable maturities.

Interest payment
The interest rate for the first coupon payment of the bond, due on January 1, 2021, was fixed at 7.15 percent because the subscription of RBI's variable rate bonds became available on July 1, 2020.

Interest is payable semi-annually from the date of bond issuance until the 30th June / 31st December, as applicable, and then half-yearly for periods ending on the 30th June and 31st December, on the 1st July and 1st January, respectively.

RBI floating rate taxation
Depending on the bond holder's relevant tax status, interest on the bonds will be subject to taxation under the Income-tax Act of 1961. While interest is being paid, taxes will be deducted at the source.

Features of the RBI Savings Bond
a) These bonds can be purchased by residents and Hindu Undivided Families (HUFs).
b) The minimum investment in these bonds is Rs 1,000, with no maximum amount.
c) The bonds have a fixed seven-year term. Individual investors aged 60 and above can make premature withdrawals, subject to a minimum lock-in time based on the bond holder's age.
d) These bonds do not pay interest on a cumulative basis (at the end of the maturity of the bonds). Every year, on January 1 and July 1, the interest sum is paid out in half.
e) The bonds are not transferable. Transferability is limited to nominee(s)/legal heir in case of death of the holder.
f) The bonds are not tradable in the secondary market and also not eligible as collateral for availing loans.
G) A sole holder or a sole surviving holder of a Bond, being an individual, can make a nomination.