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RBI bonds' interest rate retained at 7.15% for January-March 2021

The RBI Bonds have a tenor of 7 years and the interest earned on it is fully taxable, which is reset in 6 every month.

January 13, 2021 / 07:28 PM IST
RBI | Representative Image.

RBI | Representative Image.

The Centre, while maintaining their advantage over bank fixed deposits on the Government of India Savings Bonds, retained a 7.15 percent rate for January-March 2021. Popularly known as RBI Bonds, they do not have a fixed interest rate.

The RBI Bonds have a tenor of 7 years and the interest earned on it is fully taxable, which is reset in 6 every month. Though the FD rates on RBI Bonds is 7.15 percent, most of the large banks kept the rate in between 4-6 percent, reported LiveMint.

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Despite GoI Savings Bonds being linked to the prevailing rate on National Savings Certificates (NSCs), it pays out 0.35 percent more than the NSC rate. Meanwhile, investors should know that NSCs' term is of 5 years and Saving Bond's is of 7 years. Also, NSCs are eligible for tax deduction up to Rs 1.5 lakh per annum, which RBI Bonds don't have.

With this new development, the interest rate on the NSCs has been retained at 6.8 percent, while for RBI Bonds it has been maintained as 7.15 percent. Each year, these RBI Bonds pay out interest on the first day of January and July. They can be bought from SBI branches and also from some branches of private sector banks including ICICI Bank, Axis Bank, and HDFC Bank.

The minimum amount for investment in RBI bonds is Rs 1,000, while the maximum limit has been relaxed. Special privilege has been given to senior citizens who may take a premature exit after 4, 5 and 6 years for those aged 80 and above, 70 - 80 years and 60 - 70 years of age, respectively. While the interest due for the 6 months immediately preceding the exit is deducted, in case someone takes the premature exit.
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