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Time of India
23-05-2025
- Business
- Time of India
Investors shift to RBI floating rate bonds as fixed deposit rates slide
With fixed deposit rates steadily declining due to Reserve Bank of India (RBI) rate cuts and abundant liquidity, risk-averse investors are turning their attention to the RBI's floating rate savings bonds. These bonds currently offer attractive annual yields of up to 8.05% for a 7-year tenure, providing a more lucrative and safer alternative to traditional fixed deposits. 'Corporate and bank deposit rates have come down in line after the rate cuts announced by RBI,' Anup Bhaiya, MD and CEO of Money Honey Financial, a Mumbai-based distributor told ET. 'However, since the RBI floating rate deposit rates continue to be unchanged at 8.05%, there is higher demand for these deposits from retail investors.' These bonds, issued by the central bank on behalf of the government, are considered highly safe and offer a 35-basis-point premium over returns promised by the National Savings Certificate. Currently, the bonds provide an interest rate of 8.05%, paid semi-annually, with the rate reset every six months. Interest income from these bonds is taxable. Despite their safety, liquidity remains a challenge. 'There is no premature withdrawal option, and these bonds cannot be used as collateral for borrowing, and hence, investors must be sure to buy and hold them until maturity,' explained Harshvardhan Roongta, CEO of Roongta Securities. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like 5 Books Warren Buffett Wants You to Read In 2025 Blinkist: Warren Buffett's Reading List Undo The minimum investment amount is ₹1,000, with no upper investment limit. Following RBI's cumulative 50 basis points rate cut since February, both banks and deposit-taking non-bank lenders have reduced deposit rates by 25 to 100 basis points. The current 10-year government bond benchmark yields 6.22%. For comparison, Bajaj Finance, rated AAA, offers 7.25% for deposits between 24 to 60 months, while SBI pays 6.3% for deposits spanning 5 to 10 years. Senior citizens can earn 50 to 100 basis points more. Investors can purchase these bonds through the RBI retail direct website, distributors, or private bank websites. 'These bonds help you earn a lucrative 180 basis points over the 10-year benchmark government bond, while over fixed deposits and corporate deposits these bonds help you earn around 65-150 basis points more,' said Vikram Dalal, Managing Director of Synergy Capital. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Economic Times
23-05-2025
- Business
- Economic Times
Are RBI floating rate bonds the best option as FD rates plummet?
Investors are showing increased interest in the Reserve Bank of India's floating rate savings bonds. These bonds offer annual yields up to 8.05% for a seven-year term. Fixed deposit rates are declining, making these bonds attractive. The bonds provide a 35-basis-point markup over the National Savings Certificate. While safe, they lack liquidity and cannot be prematurely withdrawn. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Mumbai: Risk-averse savers are increasingly turning to the Reserve Bank of India 's (RBI) floating rate savings bonds , which promise annual yields of up to 8.05% for a 7-year tenure, as fixed deposit rates head south quickly amid modest credit growth, ample liquidity, and expectations of further policy rate reductions."Corporate and bank deposit rates have come down in line after the rate cuts announced by RBI," said Anup Bhaiya, MD and CEO, Money Honey Financial - a Mumbai-based distributor. "However, since the RBI floating rate deposit rates continue to be unchanged at 8.05%, there is higher demand for these deposits from retail investors."These bonds, issued by the central bank on behalf of the government, come with high safety and pay a 35-basis-point mark-up over the returns promised by the National Savings works out currently to 8.05% and has a tenure of seven years, with interest paid once every six months. This interest rate could also change once every six months, and the interest income is taxable for the be sure, these bonds, although sovereign backed, do not have a liquid market, and investors need to hold them until maturity."There is no premature withdrawal option, and these bonds cannot be used as a collateral for borrowing, and hence, investors must be sure to buy and hold them until maturity," said Harshvardhan Roongta, CEO, Roongta minimum investment is ₹1,000 and there is no upper limit on investments in these said both deposit-taking non-bank lenders and banks have slashed rates by 25 to 100 basis points after RBI reduced the policy rate by a cumulative 50 basis points since 10-year benchmark yields investors 6.22%.After the rate cuts, Bajaj Finance that has a AAA rating pays 7.25% for a 24-60 month deposit, while SBI pays 6.3% for a deposit between 5 and 10 years. Senior citizens could earn 50-100 basis points can log on to the RBI retail direct website to buy these bonds, or can buy them from a distributor or private bank websites easily. "These bonds help you earn a lucrative 180 basis points over the 10-year benchmark government bond, while over fixed deposits and corporate deposits these bonds help you earn around 65-150 basis points more," said Vikram Dalal, managing director, Synergy Capital.
Time of India
23-05-2025
- Business
- Time of India
Are RBI floating rate bonds the best option as FD rates plummet?
Mumbai: Risk-averse savers are increasingly turning to the Reserve Bank of India 's (RBI) floating rate savings bonds , which promise annual yields of up to 8.05% for a 7-year tenure, as fixed deposit rates head south quickly amid modest credit growth, ample liquidity, and expectations of further policy rate reductions. "Corporate and bank deposit rates have come down in line after the rate cuts announced by RBI," said Anup Bhaiya, MD and CEO, Money Honey Financial - a Mumbai-based distributor. "However, since the RBI floating rate deposit rates continue to be unchanged at 8.05%, there is higher demand for these deposits from retail investors." by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Semua yang Perlu Anda Ketahui Tentang Limfoma Limfoma Pelajari Undo These bonds, issued by the central bank on behalf of the government, come with high safety and pay a 35-basis-point mark-up over the returns promised by the National Savings Certificate. Bonds Corner Powered By Are RBI floating rate bonds the best option as FD rates plummet? Investors are showing increased interest in the Reserve Bank of India's floating rate savings bonds. These bonds offer annual yields up to 8.05% for a seven-year term. Fixed deposit rates are declining, making these bonds attractive. The bonds provide a 35-basis-point markup over the National Savings Certificate. While safe, they lack liquidity and cannot be prematurely withdrawn. Why are Japanese bond yields rising and what does it mean for Indian investors? Kumar Mangalam Birla's Grasim gets cheapest rupee bond deal in 5 years Can India bond yields fall lower than that of US? Uday Kotak wonders India bond yields continue downward trend on bets of policy easing Browse all Bonds News with That works out currently to 8.05% and has a tenure of seven years, with interest paid once every six months. This interest rate could also change once every six months, and the interest income is taxable for the investor. Liquidity Challenges Live Events To be sure, these bonds, although sovereign backed, do not have a liquid market, and investors need to hold them until maturity. "There is no premature withdrawal option, and these bonds cannot be used as a collateral for borrowing, and hence, investors must be sure to buy and hold them until maturity," said Harshvardhan Roongta, CEO, Roongta Securities. The minimum investment is ₹1,000 and there is no upper limit on investments in these bonds. Distributors said both deposit-taking non-bank lenders and banks have slashed rates by 25 to 100 basis points after RBI reduced the policy rate by a cumulative 50 basis points since February. The 10-year benchmark yields investors 6.22%. After the rate cuts, Bajaj Finance that has a AAA rating pays 7.25% for a 24-60 month deposit, while SBI pays 6.3% for a deposit between 5 and 10 years. Senior citizens could earn 50-100 basis points more. Investors can log on to the RBI retail direct website to buy these bonds, or can buy them from a distributor or private bank websites easily. "These bonds help you earn a lucrative 180 basis points over the 10-year benchmark government bond, while over fixed deposits and corporate deposits these bonds help you earn around 65-150 basis points more," said Vikram Dalal, managing director, Synergy Capital.
