The Reserve Bank of India has maintained the interest rate on its Floating Rate Savings Bond (FRSB) at 8.05% for the next six months, as reported by Business Standard. The coupon rate on the Floating Rate Savings Bond 2020 (Taxable) from July 1 to December 31, 2026, will remain unchanged. The interest will be payable on January 1, 2027. The rate stability is attributed to the bond's structure, which is linked to the National Savings Certificate (NSC) interest rate, with the RBI bond carrying a 0.35% additional spread over the NSC rate. In a statement dated July 1, 2026, the RBI confirmed that the coupon rate remains at 8.05% (7.70%+0.35%), unchanged from the previous half-year. This structure links FRSB 2020 (T) to NSC rates, so future semi-annual rates will continue to reset in line with prevailing small savings rates.
Unlike traditional fixed deposits where interest rates remain constant throughout the tenure, the RBI Floating Rate Savings Bond operates on a six-month reset cycle, as detailed by Business Standard. The interest rate is reset on January 1 and July 1 based on the prevailing NSC rate. This mechanism means the bond's return can increase if the government raises NSC rates or decline if rates are reduced. As per ET Wealth Online, the interest rate is reset every six months, on January 1 and July 1, based on the prevailing NSC rate. If the government revises the NSC rate during its periodic review, the bond's interest rate also changes at the next reset, allowing investors to benefit if NSC rates move higher while returns can also fall if NSC rates are reduced. With no change in the rate, investors get clarity on regular and stable income from government-backed floating rate instruments.
According to Business Standard, the RBI bond currently offers higher returns than several small savings schemes, including the National Savings Certificate at 7.7% and the Monthly Income Account Scheme at 7.4%. However, it falls short of the Senior Citizen Savings Scheme at 8.2% and the Public Provident Fund at 7.1%. The bond's advantage lies in no upper investment limit compared to SCSS, which has investment restrictions. Among bank deposits, many large banks offer five-year FD rates below the RBI bond rate, while some small finance banks provide higher rates. As per ET Wealth Online, the 8.05% interest rate on RBI floating rate bonds indicates that it is offering a more attractive return than many small savings schemes and bank fixed deposits (FDs).
As reported by ET Wealth Online, interest earned on RBI Floating Rate Savings Bonds is fully taxable as per slab rates. The interest is added to the investor's total income and taxed according to their income tax slab, with tax also deducted at source in accordance with prevailing income tax rules. The investment itself does not qualify for any deduction under Section 80C of the Income Tax Act, 1961. According to Bankbazaar's Adhil Shetty, RBI bonds do not offer a fixed return for the entire seven-year investment period as its rate is linked to the NSC. Harsimran Sahni from Anand Rathi Global Finance suggests RBI bonds are best treated as tactical allocations rather than core portfolio holdings, noting they may not warrant a permanent allocation within long-term strategies given their cyclical suitability.
