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RBI's taxable bond: A safe option with reasonable returns

Investors looking for stability of returns and willing to forego liquidity can look at this investment option

February 10, 2020 / 11:34 PM IST

The interest rates on deposits of public sector banks (PSBs) have steadily declined over the past couple of years. Most PSBs interest rates of less than 7 per cent across tenures. In this light, RBI’s bonds seem attractive, given the rate on offer – 7.75 per cent – that too for a tenure of seven years.

These bonds are popularly known as RBI or GOI bonds and are available on tap all through the year through nationalised banks. A few private sector banks too allow these investments – Axis, ICICI and HDFC banks.
The interest, 7.75 per cent, is payable half-yearly. There is a cumulative option too. Investments compound at half-yearly rests in this option. An investor is paid a maturity value of Rs 1703 for Rs 1000 invested.

You can invest a minimum amount of Rs 1000 and there is no upper limit. These bonds are issued in demat form.

A taxing option