RBI Floating Rate Bonds: Most investors want their money to provide good returns as well as security. Whenever it comes to safe investment, the first options that come to your mind would be FD, Gold, Post Office and various schemes, but do you know that floating rate bonds of RBI are also becoming a new way of making safe investments. This government loan has a lock-in period of 7 years. Meaning, once the money is deposited, it cannot be withdrawn for seven years. But their specialty is that these interest rates keep changing, which are linked to the rate of National Savings Certificate i.e. NSC.
You will get this much interest by investing in floating rate bonds
In FD you get interest at a fixed rate whereas in floating rate bonds the interest rates keep going up and down. If interest rates increase, your returns will also increase. If we talk about NSC interest rates in the last ten years, they have been between 6.8 percent to 8.5 percent. It had gone down from 2019 to 2021, but has increased again after that. In this, interest is available every six months, but there is no option to add it. That means interest will be given separately, not on your main amount.
Talking about tax, it is levied on slab rate, meaning it is taxed according to your earnings. The minimum amount of investment in floating rate bonds is only Rs 1000 and you can invest any maximum amount in it. You can buy them from the RBI Retail Direct website, from the platforms of some private banks or through financial product distributors.
How are floating rate bonds better than FDs?
If you are thinking that you will get more benefit in FD than floating rate bonds of RBI, then for this we also make you a comparison with FDs of top banks. Currently, 6.05 percent interest is available on fixed deposits of State Bank of India for 5 to 10 years. At the same time, these floating rate bonds are currently giving you a return of 8.05 percent. Talking about Axis Bank, this bank is giving 6.60 percent interest on its FD up to Rs 5 crore and its time period is also up to 10 years. Apart from this, let us also tell you that if the interest rates increase in fixed rate bonds, the price falls, but this does not happen in floating ones. This is also a good way to protect against rising rates. After the rising prices of gold and silver in the market, people are turning towards fixed income. Big investors are using them in their portfolio so that the risk remains less.
A good way to make safe investments
According to the report of Economic Times, in the opinion of experts, these bonds provide a strong base to the lending part of the portfolio. Aditya Agarwal, co-founder of Wealthy.in, says that these are safe investments for the long term. Suresh Darak, Founder, Bondbazaar.in, explains that rising rates increase coupons, which protects against losses in fixed bonds. This brings balance to the loan portfolio. Anup Bhayya, MD and CEO of Money Honey Financial Services, says that money is coming here after diverting it from other investments, due to which the demand is increasing. These bonds are government guaranteed, so the risk is very low.
Investors have always liked low-risk investment options. Liking them. Floating rate bonds also protect investors from inflation to some extent because the returns keep changing. Although there is tax on interest, people invest in it seeing security and good returns. It is easy for everyone, from small investors to big investors. Just have to wait for seven years. But the peace and happiness of earning in return is different. As interest rates are changing in India, these bonds have become even more important.
