RBI Floating Rate Savings Bonds (FRSB): A Full Guide

RBI Floating Rate Savings Bonds, 2020 (Taxable), often just called “RBI bonds”, are 7-year government-backed bonds that pay a floating interest rate. For January 1 to June 30, 2026 the rate is 8.05% per year, payable on July 1, 2026. The rate resets every six months, so it can go up or down.

Short on time? The rate is not fixed. It is the National Savings Certificate (NSC) rate plus a 0.35% spread, reset on every January 1 and July 1. So today's 8.05% may change at the next reset.

These are savings bonds issued by the Reserve Bank of India for resident individuals and Hindu Undivided Families (HUFs). You lend money to the government for 7 years and earn interest twice a year. Your capital is backed by the Government of India, so the credit risk is very low. The catch is that the interest rate can change every six months.

A fixed-deposit rate is locked the day you invest. A floating rate is not. RBI links the FRSB coupon to the NSC rate, a small-savings rate that the government revises each quarter. RBI then adds a fixed 0.35% (35 basis points) on top.

So when small-savings rates rise, your FRSB payout rises at the next reset. When they fall, your payout falls. This protects you from being stuck with a low rate for 7 years, but it also means you cannot count on today's rate lasting.

Here is the current position, confirmed by RBI and major banks:

• Current coupon: 8.05% per year, for the period January 1, 2026 to June 30, 2026.
• How it is built: NSC rate of 7.70% plus a fixed spread of 0.35%, which gives 8.05%.
• Reset dates: every 6 months, on January 1 and July 1. RBI announces the new rate each time.
• Payout: interest for this half-year is payable on July 1, 2026.

Treat 8.05% as the rate for this window only, not a permanent return. Check the rate again at each reset.

• Tenure: 7 years from the date of issue.
• Minimum investment: Rs 1,000, and in multiples of Rs 1,000 after that.
• Maximum investment: no upper limit.
• Interest payout: half-yearly, on January 1 and July 1 each year.
• No cumulative option: you cannot let interest compound and take it all at maturity. The income is paid out every six months.
• Form: held electronically in a Bond Ledger Account, not as a paper certificate.

• Resident individuals, including jointly with another resident individual.
• Hindu Undivided Families (HUFs).
• Not eligible: Non-Resident Indians (NRIs) cannot invest in these bonds.

Nomination is allowed for a sole individual holder, so the bond can pass to your nominee or legal heir if you die.

The interest is fully taxable. There is no tax break here, and no Section 80C deduction. Plan your investment with the tax in mind.

• Interest is taxable under the Income-tax Act, 1961, and is added to your total income.
• You pay tax at your own income-tax slab rate on the interest.
• This is the same under the old and the new tax regime. These bonds give no deduction in either regime.
• Tax is deducted at source (TDS) when the interest is paid. The TDS is adjusted against your final tax when you file your return.

Because the interest is paid out and not reinvested, you receive a regular taxable income stream rather than a lump sum at maturity.

1. Decide your amount. Start at Rs 1,000 and use multiples of Rs 1,000. There is no upper limit.
2. Choose a channel. You can apply through the RBI Retail Direct portal or through authorised banks, including the State Bank of India and major public and private sector banks.
3. Open or use a Bond Ledger Account. The bond is issued only in electronic form, so your holding sits in this account.
4. Complete KYC. Keep your PAN, Aadhaar, bank details and a recent photo ready. You must be a resident individual or an HUF.
5. Pay and confirm. Pay through your chosen channel. The bond is then issued in electronic form to your Bond Ledger Account.
6. Note your interest dates. Your half-yearly interest will land in your linked bank account on January 1 and July 1.

As a rule, no. The money is locked for the full 7 years, and the bonds are not transferable and cannot be sold in the secondary market. The only exit is on maturity, by nomination, or to a legal heir on death.

There is one exception. Senior citizens can withdraw early after a minimum lock-in that depends on their age:

• 60 to 70 years: lock-in of 6 years.
• 70 to 80 years: lock-in of 5 years.
• 80 years and above: lock-in of 4 years.

A penalty applies on premature withdrawal. Banks deduct 50% of the interest due for the last six months. You must give valid age proof to the issuing bank.

Suppose a retiree invests Rs 5,00,000 in FRSB at the current 8.05% rate. The yearly interest works out to about Rs 40,250, paid in two parts of roughly Rs 20,125 on January 1 and July 1. That interest is added to the retiree's income and taxed at their slab. At the next reset, the rate could rise above or fall below 8.05%, changing the payout. This is an illustration only, not a quote or an offer.

FRSB bonds suit savers who want a safe, government-backed home for money they will not need for 7 years, and who want a regular half-yearly income. They fit conservative investors and retirees who value capital safety over the chance of higher returns.

They suit you less if you need to withdraw early, if you want compounding rather than a payout, or if you are in a high tax bracket and want tax-efficient growth instead of fully taxable interest. NRIs cannot invest at all.

For January 1 to June 30, 2026, the rate is 8.05% per year, payable on July 1, 2026. It is the NSC rate of 7.70% plus a 0.35% spread. The rate resets every six months, so check it again at the next reset on July 1, 2026.

No. The interest is fully taxable under the Income-tax Act, 1961, at your income-tax slab rate, and TDS is deducted when interest is paid. There is no Section 80C deduction, and the position is the same under the old and the new tax regime.

No. Only resident individuals, including joint resident holders, and Hindu Undivided Families can invest. Non-Resident Indians are not eligible to buy these bonds.

No. The minimum is Rs 1,000 and you invest in multiples of Rs 1,000, but there is no upper limit on how much you can put in.

Only senior citizens can. The minimum lock-in is 6 years for ages 60 to 70, 5 years for ages 70 to 80, and 4 years for ages 80 and above. A penalty of 50% of the last six months' interest applies. Other investors must hold to maturity.

No. There is no cumulative option. Interest is paid out every six months on January 1 and July 1, so you receive a regular income rather than a compounded lump sum at maturity.

• Check today's published FRSB rate and its validity window before you commit any money.
• Decide your amount in multiples of Rs 1,000 and whether you can lock it for 7 years.
• Keep your PAN, Aadhaar, bank details and a photo ready for KYC.
• Visit the RBI Retail Direct portal or your bank to open or use a Bond Ledger Account.
• If you are a senior citizen, ask your bank about the early-exit lock-in for your age.

• Reserve Bank of India, Floating Rate Savings Bonds, 2020 (Taxable), rate notification for January 1 to June 30, 2026 (8.05%).
• State Bank of India, RBI Bonds product page, scheme features (tenure, eligibility, taxability, premature encashment).
• Government of India, Income-tax Act, 1961 (taxability of interest).

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