RBI Bonds are issued by the Reserve Bank of India (RBI) to raise funds for various government projects and initiatives. Introduced in 2003, RBI bonds are also known as Government of India Savings (Taxable) Bonds or Floating Rate Savings Bonds.
RBI bonds are one of the safest investment options available in India and offer a fixed rate of return.
|Key Features of RBI Floating Rate Savings Bonds|
|Interest Payout||Semi-Annual (January and July)|
|Interest Rate (January 1, 2023 to June 30, 2023)||7.35% p.a.|
|Minimum Investment||Rs. 1000|
|Maximum Investment||No Limit|
Eligibility to Invest in RBI Bonds
#1. Individual Residents
Resident individuals have the opportunity to invest in RBI Bonds. Whether you are an –
- individual investor
- investing jointly with a partner
- investing in a survivorship mode
- investing on behalf of a minor as a parent or guardian.
RBI Bonds provide a diverse range of investment options to suit your needs.
#2. Hindu Undivided Family (HUF)
HUFs, as a distinct legal entity, charitable institutions, and universities are also eligible to invest in RBI Bonds.
NRIs are not eligible to invest in RBI Bonds.
Interest Rate on RBI Bonds in 2023
Base rate – The RBI bonds interest rate is based on the National Savings Certificate (NSC) interest rate, with an additional spread of 35 basis points on the NSC interest rate.
Interest rate – The Rbi bonds come with a floating rate of interest which is reset by every 6 months, specifically in January and July.
The interest rate for RBI floating bond from January 1, 2023 to June 30, 2023 and payable on July 1, 2023 has been reset at 7.35%, which is calculated as the NSC interest rate of 7% plus the spread of 0.35%.
You may like to read step-by-step guide on how to invest in bonds in India.
Things to Consider Before Buying RBI Bonds
#1. Minimum Investment in RBI Bonds
You need to minimum investment in RBI Bonds is Rs. 1,000 or multiples of Rs. 1,000. There is no upper limit for maximum investment.
#2. Maturity period
RBI Bonds have a fixed maturity period of 7 years. However, premature redemption is allowed in specified categories of senior citizens.
RBI Bonds are non-transferable, meaning you cannot be transferred to another individual during the bondholder’s lifetime.
However, in case of the bondholder’s death, the bonds can be transferred to the nominee designated by the bondholder.
RBI Bonds are not tradable in the secondary market. Once you invest in the RBI bonds, you cannot buy or sell them in the open market like other securities.
#5. Loan facility
You cannot use the RBI bonds as collateral to borrow from banking institutions, non-banking financial companies or financial institutions.
#6. Bonds holding mode
RBI Bonds are held in electronic format. When you invest in these bonds, RBI will open a Bond Ledger Account (BLA) for you and issue a physical certificate as proof of your investment. However, the bonds are primarily held and managed in electronic form.
The interest earned on RBI bonds is taxable under the Income Tax Act, 1961 as per your applicable income tax slab rates of the individual.
Premature Withdrawal of RBI Bonds
Premature redemption facility is allowed only for senior citizens according to their age. The specific lock-in periods for premature withdrawal depend on the age group:
|Age Group||Premature withdrawal|
|60-70 years||6 years|
|70-80 years||5 years|
|Above 80 years||4 years|
Penalty for premature withdrawal
The penalty is calculated as 50% of the interest due and payable for the last 6 months of holding. This means that half of the interest earned during the last 6 months will be deducted from the total amount payable upon premature withdrawal.
How to Invest in RBI Bonds
You can buy RBI bonds through the banks and the Stock Holding Corporation of India(SHCI).
Here is the list of the designated banks and SHCI –
- Bank of Baroda (Including Vijaya Bank and Dena Bank)
- State Bank of India
- Bank of India
- Canara Bank (including Syndicate Bank)
- UCO Bank
- Indian Overseas Bank
- Indian Bank (Including Allahabad Bank)
- Union Bank of India (including Andhra Bank and Corporation Bank)
- Punjab National Bank (including Oriental Bank of Commerce and United Bank of India)
- Punjab & Sind Bank
- Bank of Maharashtra
- HDFC Bank Ltd.
- ICICI Bank Ltd.
- IDBI Bank Ltd.
- Axis Bank Ltd.
- RBI RDG Account
#1. Invest in RBI Bonds via RBI Retail Direct Online Portal
RBI Retail Direct is a one stop solution where you can invest in government securities including RBI bonds, Sovereign Gold Bond (SGB), government of India Treasury Bills (T-Bills), and State Development Loans (SDLs).
You need to open a Direct Gilt Account with the RBI to invest through RBI Retail Direct. There is no fee charged for account opening and maintaining a RBI Retail Direct Gilt account.
#2. Invest in RBI Bonds Through ICICI Bank
Step #1. Login your ICICI net banking using your credentials.
Step #2. Go to the “Investment & Insurance” option and select the “Invest Online” option.
Step #3. You will see the floating rate saving bonds on your screen. Click on “Invest Now.”
Step #4. Select the account number, enter the investment amount, and select the nominee option.
Step #5. If you already have an ICICI bank account then your personal details will be auto-filled. You need to verify your details and add your nominee details.
Step #6. Accept the terms and conditions, then enter the OTP to authorize the transactions for investing in RBI bonds.
You can also follow the same procedure to invest in RBI bonds through the above listed banks online.
#3. Invest in RBI Bonds Offline via Visiting Nearest Bank Branch
Step #1. Visit the Bank Branch
You need to Visit any one of the above-listed banks.
Step #2. Collect the RBI Bond Application Form.
You can collect the application form for RBI Bonds from the bank representative. They will provide you with the necessary forms and guide you through the application process.
You can also download the application form for RBI bonds.
Step #3. Fill in the Application Form
Carefully fill in the application form, providing accurate information about your personal details, investment amount, and bank details. Ensure that all the details are legible and correctly entered.
Step #4. Submit the Application Form
Once you have filled in the application form, submit it along with the required documents to the bank representative. The necessary documents may include proof of identity, proof of address, PAN card, canceled cheque, and any other documents specified by the bank.
If you do not have a PAN card, you can apply a PAN card online through NSDL (Protean) /UTIITSL.
Step #5. Pay the Investment Amount
Make the payment for your desired investment amount as specified by the bank. You can pay via cheque, demand draft, or any other payment method accepted by the bank. The bank representative will guide you through the payment process.
Step #6. Obtain the Acknowledgment Receipt
After successfully submitting the application form and making the payment, the bank will provide you with an acknowledgment receipt. This receipt serves as proof of your investment in RBI Bonds. Keep it in a safe place for future reference.
Step #7. Bond Certificate and Interest Payments
Upon processing your application, the bank will issue the RBI bond certificate to you. This certificate confirms your investment in RBI Bonds. Additionally, the bank will provide instructions on how to receive interest payments and any other relevant information regarding the bond.
RBI Bonds are considered safe and secure investments as they are backed by the Reserve Bank of India.
However, it’s important to note that like any investment, there is still a certain level of risk associated with market fluctuations and changes in interest rates.
No, Non-Resident Indians (NRIs) are not eligible to invest in RBI Bonds.
RBI Bonds have a lock-in period of 7 years. However, premature redemption is allowed for specified categories of senior citizens based on their age and the corresponding lock-in periods.
- Age bracket of 80 years and above – 4 years
- Between 70 to 80 years – 5 years
- Between 60 to 70 years – 6 years
Yes, you can invest in RBI Bonds through the RBI Retail Direct Online Portal by opening a Direct Gilt Account with the RBI.
The penalty for premature withdrawal of RBI Bonds is 50% of the interest due and payable for the last 6 months of holding.
No, RBI Bonds cannot be used as collateral to borrow from banking institutions, non-banking financial companies, or financial institutions.
You can not trade the RBI bonds in the secondary market. Once you invest in the RBI bonds, you cannot buy or sell them in the open market like other securities.
The interest earned on RBI floating rate savings bonds is fully taxable at the applicable income tax slab rates of the individual.
There is no maximum limit for investment in the Bonds.
The minimum investment in RBI bonds is Rs. 1000/-.
A person resident in India
- Individual’s own capacity
- Individual capacity on joint basis
- Individual capacity on any one or survivor basis
- on behalf of a minor as father/mother/legal guardian
Hindu Undivided Family (HUF)/charitable institutions/universities.
Note: NRIs are not eligible for making investments in these Bonds.