RBI's floating rate savings bonds: Why should investors invest in them?
RBI has now allowed retail investors to apply for floating rate savings bonds via its Retail Direct Portal, there is a recent addition to the number of fixed income instruments one can opt for. For the uninitiated, subscription to these bonds is done in the form of cash (up to ₹20,000 only). The bonds may be held by a person resident in India in their individual capacity or joint basis or on any or survivor basis or on behalf of a minor as father/ mother or legal guardian.
Applications for these bonds are received in the designated branches of State Bank of India, IDBI Bank, Axis Bank, HDFC Bank and ICICI Bank. The floating rate bonds are fixed income instruments that can be held by an individual or a Hindu Undivided Family (HUF) with interest payable at half yearly intervals on Jan 1st and July 1st every year. On these bonds, there is no option to pay interest on a cumulative basis.
The coupon rate will be linked/ pegged with prevailing National Saving Certificate with a spread of (+35) bps over the respective NSC rate. There is no maximum limit for investment in bonds. The Bonds will be issued only in the electronic form and held at the credit of the holder in an account called Bond Ledger Account (BLA), opened with the Receiving Office.
The Bonds shall be repayable on the expiration of 7 (Seven) years from the date of issue. Premature redemption shall be allowed for specified categories of senior citizens. Interest on the Bonds will be taxable under the Income-tax Act, 1961 as amended from time to time and as applicable according to the relevant tax status of the Bond holder.
Read more on livemint.com
