Over the past few months, a quiet shift has been happening in the world of safe investments. More and more conservative investors—especially people who don’t want to take risks with their money—are moving towards RBI’s Floating Rate Bonds.
They’re not flashy. They don’t promise overnight wealth. But they’re stable, backed by the government, and offer something that most safe products don’t: a return that adjusts with interest rates.
So, what exactly are these bonds?
Think of them as a long-term savings option backed by the Government of India. You put in your money, and every six months, the interest you earn gets reset based on prevailing rates. Right now, the coupon is 8.05%, which is higher than many bank FDs.
The tenure is seven years, and the interest gets credited twice a year. That makes it great for anyone who likes predictable cashflow.
Why are they becoming so popular?
1. They’re genuinely safe
Since these bonds are issued by the government, the default risk is almost zero. For people who don’t want to take chances with the stock market, this is extremely reassuring.
2. Better returns than most FDs
With FD rates going down again, the 8%+ return on these bonds looks attractive. It’s one of the few stable options offering such yields right now.
3. They move with interest rates
This is the biggest advantage. If interest rates rise, the payout on these bonds also rises. Fixed-rate instruments don’t offer this benefit.
4. Perfect for steady income
Because interest is paid twice a year, many retirees and low-risk investors prefer them for a predictable income stream.
5. Start with as little as ₹1,000
You don’t need a huge lump sum. Anyone can start small and build up gradually. But it’s not perfect
A few things to keep in mind:
- It’s a 7-year lock-in, so don’t invest money you’ll need soon.
- The interest is fully taxable, so the post-tax return depends on your slab. ∙ There’s no easy exit before maturity unless you’re a senior citizen. ∙ You can’t use the bond as loan collateral.
- And while the rate resets, inflation can sometimes dilute the real return.
Who should consider this?
- Investors who want safety first
- People nearing retirement or already retired
- Anyone looking for stable, twice-a-year income
- Those who want a mix of fixed and floating interest products in their portfolio Bottom line
RBI’s Floating Rate Bonds are not the most glamorous investment—but that’s exactly their charm. They’re stable, predictable, government-backed, and offer a better yield than most conservative products today.
If you prefer peace of mind over high risk and high return, these bonds are definitely worth considering.
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