The government has recently announced the launch of floating rate savings bonds, 2020 with the interest rate of 7.15%. These bonds were issued in place of earlier withdrawn 7.75% RBI bond. As per RBI, the interest rate on these bonds shall reset every 6 months and the first reset shall be on January 01, 2021. Also, there is no option available to pay interest on a cumulative basis, and therefore, it shall be paid every six months and not on maturity. Here are some of the features of these bonds:

  1. The subscription of floating bonds started on 1st July 2020 as per the RBI press release.
  2. Individuals and HUFs can invest in these bonds and NRIs are not eligible.
  3. There’s no maximum limit for the investment in bonds. The minimum investment starts from Rs. 1,000.
  4. The bonds shall have a maturity period of 7 years from the date of issue. Also, premature redemption shall be available for a specific class of senior citizens.
  5. Interest received from these bonds shall be taxable as per the income tax slab rates applicable to the individual.
  6. Investment in these bonds shall be in the form of a bank draft/cheque or in any electronic mode acceptable to the receiving office. It shall be available at designated branches of SBI, nationalized banks, ICICI bank, HDFC bank, IDBI bank and Axis bank. These bonds are issued only in electronic form.
  7. The bonds shall not be transferrable except in case of death to the nominee or legal heir.
  8. These bonds are not available to be traded in the secondary market and cannot be used as collateral from banks, NBFCs, and other financial institutions.