RBI bonds have been one of the most popular debt instruments since its inception. And it has been deemed to be an excellent option for senior citizen investors.
This article will delve deeper into this particular form of savings bond.
Introduction to RBI Bonds
Bonds, sometimes called investment bonds, are global fixed-term financial obligations issued by business entities or sovereign governments.
RBI Bonds are one of the most important forms of bonds among the many available for investment. RBI Bonds, introduced to the market in 2003, are generated by the Government of India and can be held by nationals.
Features of RBI Bonds
Here is the list of the features of RBI Bonds:
- The Reserve Bank of India has launched the RBI floating rate bonds, which are available to retail investors who are Hindu Undivided Families and Indian nationals.
- RBI bonds mandate an investment of Rs. 1000 at least, following which you have to invest in multiples of Rs. 1000. However, the limitation on the maximum investment amount does not exist.
- Due to the assurance made by the RBI, these bonds are risk-free. Retirement benefits include principal and interest payments that are guaranteed.
- These bonds have a semi-annual interest payment schedule. Each year, interest must be paid between January and July.
- Since the interest rate on RBI bonds is variable, they are sometimes termed RBI floating rate bonds. The RBI updates the interest rate every six months.
- The present interest rate is 7.15 per cent. The rate will be changed again in January 2023 after the revision in June of the current year.
- Their interest rate is 0.35 percentage points more than the NSC rate, which is connected to the NSC—National Savings Certificate. Such certificated is generated by Indian Post Offices.
- One drawback of these bonds is that they cannot be traded, transferred, or pledged as collateral with banks, so you are stuck with them for seven years.
- An individual or group of people may hold the bond. The individual person or holder may make a nomination.
- However, the lock-in duration varies depending on the age group. There is a seven-year maturity. But older persons have the option of early withdrawal.
The least lock-in period for investors between:
- 60 to 70 years of age is six years
- 70 to 80 years of age is five years
- Above 80 years of age is four years
RBI Floating Rate Bonds Interest Rate 2022?
The interest rate for RBI Floating Rate Bonds resets every six months. The first reset occurred on January 1st, 2021. The standard National Saving Certificate (NSC) rate on January 1st, 2021, stood at 6.8%.
Therefore, the RBI Floating Rate Bonds interest rate was 35 basis points higher than the NSC rate for from January 1st, 2021 to June 30th, 2021. These bonds sold for 0.35% higher, or 7.15% returns, since the NSC rate was set at 6.8%.
The second reset began on July 1st, 2021. The benchmark National Savings Certificate (NSC) rate was fixed at 6.8% on July 1st, 2021.
Because of this, the interest rate on the RBI Floating Rate Bonds was 35 basis points higher than the NSC rate from July 1st, 2021 to December 31st, 2021. These bonds sold for 0.35% extra, or 7.15% since the NSC rate was set at 6.8%.
The NSC interest rate stayed at 6.8% on July 1, 2022, while the RBI Floating Rate Interest starting from July 1st and ending on December 31st would be 7.15%.
Features of RBI Floating Rate Bonds Interest Rate 2022
Here is list of the Features of RBI Floating Rate Bonds Interest Rate 2022:
- Floating-rate bonds are reactive to fluctuations in interest rates. However, they are subject to a fixed term.
- If the bondholder became a non-resident Indian, he might keep the bond till it matures.
- The Bonds will only be issued in electronic form, and will be kept to the holder’s credit in an account with the Receiving Office called a Bond Ledger Account (BLA).
- The bond interest should be paid half-yearly once it has been issued, once on June 30th and another on December 31st.
- Starting on January 1st, 2021, the interest will fluctuate every six months. This interest rate is based on the current NSC (Post Office National Savings Certificate) interest rate plus 35 BPS (100 BPS = Rs.1).
- The bond holder’s account will be credited with interest directly. After seven years, the bonds will be due for repayment.
- The redemption amount will be remitted with the next interest rate period, notwithstanding that you have requested redemption based on your age slab.
RBI Bonds 2022 Interest-Rate
From July 1, 2022 to the end of the year December 31, 2022, the given interest rate on RBI Bonds is 7.15% (6.80% + 0.35%). It is payable on January 1, 2023.
RBI bonds are one of the most favourable options among senior citizens investors. These are ideal for earning vast amounts of money. In addition, one gets half-yearly returns as part of the floating rate.
How to Invest in 2022?
You should invest in these bonds only if you can lock in your investment for 7 years. However, the lock-in condition is relaxed for senior citizens. For the investors in the age bracket of 60-70 years, 70-80 years and above 80 years, the lock-in period is 6,5 and 4 years, respectively.”
“The sole Holder or all the joint holders may nominate one or more persons as a nominee per the provisions of the Government Securities Act, 2006 (38 of 2006) and the Government Securities Regulation, 2007, published in Part III, Section 4 of the Gazette of India dated December 1, 2007.” RBI BOND
Why to Invest in RBI Bonds?
Since RBI Bonds are issued on behalf of the Government of India, they are secured for any Indian citizen to invest in despite the lengthy lock-in term they offer to its investors. In addition, the bonds have a higher return and present zero credit risk.
Furthermore, it has a reasonable lock-in period compared to the term of FD accounts and tax-free bonds.
Should Senior Citizens Invest in these Bonds?
The RBI bond offers a greater interest of 7.15 per cent while being risk-free. Most senior citizens can purchase these bonds since the minimum investment requirement is so cheap. Senior citizens also have the option of making an early withdrawal if necessary.
Since the interest rates on RBI bonds are floating and fluctuate every six months, retirees can profit from rising rates.
RBI bonds are one of the safest and most profitable ways of investment. The bonds are generated by the Reserve Bank of India, showing how secure they are. They are an excellent option for retirees, as they get attractive returns upon investing.