RBI Floating Rate Bonds: Safe & High-Yield Investment

The Reserve Bank of India (RBI) has set the interest rate on its Floating Rate Savings Bonds (FRSBs) at 8.05% for July–December 2025. This is one of the highest returns available from a government-backed investment today.

Why Choose RBI Floating Rate Bonds?

These bonds are an excellent choice for long-term investors who value safety. Here’s why:

• Higher returns compared to most bank fixed deposits (FDs) and small savings schemes
• Government-backed, ensuring high safety
• No limit on investment amount

Better Returns Than Bank FDs

The 8.05% return on RBI bonds is higher than what most major banks offer on long-term FDs:

• Axis Bank, HDFC Bank, and ICICI Bank: 6.4–6.6%
• State Bank of India (SBI): 6.05%
• Punjab National Bank: 6.5%
• Kotak Mahindra Bank: 6.25%

Even small finance banks, which offer slightly better returns, can’t match the safety of RBI bonds.

Safety and Rate Advantage

Suresh Darak, Founder of Bondbazaar, states: “These bonds are issued by the RBI, making them very safe. Plus, they offer better returns than bank FDs.”

The interest rate is updated every six months. This means if interest rates rise, your returns could increase too.

Lock-in Period

Investors should be aware of the lock-in period:

• 7 years for individuals below 60
• 6 years for those aged 60–70
• 5 years for those aged 70–80
• 4 years for those above 80

Rate Linked to NSC

The 8.05% return is 0.35% higher than the current NSC rate of 7.7%. The rate is updated every six months, and interest is paid twice a year.

This linkage protects your investment if small savings rates decrease.

Consistent Performance

Even when interest rates were low from April 2020 to December 2022, RBI bonds offered better returns than bank FDs.

Vineet Agrawal, Co-founder of Jiraaf, says: “These bonds are great for conservative investors. They offer steady income and are backed by the government.”

Better Than PPF and SCSS

RBI bonds have advantages over other small savings schemes:

• PPF offers 7.1% interest but has a 15-year lock-in and a maximum annual investment of Rs 1.5 lakh
• SCSS offers 8.2% interest but has a 5-year lock-in and a maximum investment of Rs 30 lakh

Senior citizens who have reached their SCSS limit can use RBI bonds to get higher returns. There’s no limit on how much you can invest in these bonds.

Low Rate Risk

Even if interest rates go down, the semi-annual updates to the bond’s rate provide some protection.

Always consult with a qualified investment advisor before making any investment decisions.