How to buy RBI Floating Rate Bonds online?

Where and how to buy RBI Floating Rate Bonds online? Whether RBI Retail Direct offering to buy RBI Floating Rate Bonds? Slowly RBI bonds are turning popular mainly because of their high yield, safety, and the requirement for steady cash flow.

I have already written a detailed post on RBI Floating Rate Bonds feature in “RBI Floating Rate Bond 2022 – Interest Rate“. RBI Floating Rate Bonds were introduced in June 2020 by replacing the RBI 7.75% Savings BOnds (2018). In floating rate bonds, the interest rate varies based on the frequency set by the bond issuer. Such bonds will not offer you any cumulative option.

The coupon (interest rate in this bond will change once in 6 months).

As I told you above, the interest rate for RBI Floating Rate Bonds would reset once every six months. The first reset was on 1st Jan 2021. On 1st Jan 2021, the benchmarked National Saving Certificate (NSC) rate was 6.8%. Hence, for the period of 1st Jan 2021 to 30th June 2021, the RBI Floating Rate Bonds interest rate was 35 basis points over the NSC rate. Since the NSC rate was fixed at 6.8%, these bonds fetched 0.35% more = 7.15% returns.

The second reset was from 1st July 2021. On 1st July 2021, the benchmarked National Savings Certificate (NSC) rate was 6.8%. Hence, for the period of 1st July 2021 to 31st December 2021, the RBI Floating Rate Bonds interest rate was 35 basis points over the NSC rate. Since the NSC rate was fixed at 6.8%, these bonds fetched 0.35% more = 7.15%.

Again on 1st July 2022, the NSC interest rate remained 6.8%, and the RBI Floating Rate Interest Rate for the period of 1st July 2022 to 31st December 2022 will be 7.15%.

Features of RBI Floating Rate Bonds

Usually, when you invest in Bonds, the coupon (interest) that you get is fixed throughout the period. However, in the case of floating rate bonds, the interest is not fixed and it changes as per the specified bond feature.

Hence, such bonds are sensitive to interest rate fluctuation. It is not like your typical Bank FD, where you know well in advance the interest rate payable by banks for the full FD tenure.

The term of the bond is fixed. However, if you are not interested to retain the bonds, then you can sell them in the secondary market at the prevailing price of the bond if such bonds are eligible to trade.

Just one correction in the above table is that the current interest rate was reset on 1st July 2022. Hence, RBI Floating Rate Bond 2022 – Interest Rate for 1st July 2022 to 31st December 2022 is 7.15%.

In addition to the above features, let me share certain important features of this bond.

# If the holder of the bond turned NRI, then he can hold the bond up to maturity.

# 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 interest on the bonds will be payable half-yearly from the date of the issue of the bond. Once on 30th June and another on 31st December yearly. As I mentioned above, there is no option of cumulating in this bond.

The interest will change on a half-yearly basis starting from 1st January 2021. This interest rate is linked to the prevailing interest rate of NSC (Post Office National Savings Certificate)+35 BPS (100 BPS=Rs.1).

# Interest will be payable directly to the bond holder’s account.

# The bonds will be repayable after the completion of 7 years. Premature withdrawal is allowed only for those whose age is 60 years and above subject to the submission of documents relating to the date of birth proof. The minimum lock-in period for the age group 60 Yrs to 70 Yrs is 6 years. For 70 Yrs to 80 Yrs is 5 Yrs and for those whose age is beyond 80 years is 4 years.

# Even though you request redemption as per your age slab, the redemption amount will be transferred with the immediate next interest rate period. Hence, irrespective of your submission for premature withdrawal, Govt will process it either on 1st July or 1st January every year. Also, in such premature closure, Govt will deduct 50% of the last coupon payment.

How to buy RBI Floating Rate Bonds online?

Earlier you are allowed to buy RBI Floating Rate Bonds from the designated branches of SBI, Nationalized Banks, 4 private banks, and stock holding corporation of India. I was in the assumption that RBI Retail Direct is allowing us to buy RBI Floating Rate Bonds online. However, later I came to know that the floating rate bond showing on RBI Retail Direct is actually a zero coupon bond but not RBI Floating Rate Bond (IN0020210160). Also, the maturity of the bond which is shown on RBI Retail Direct is 2028. However, RBI Floating Rate Bonds have a tenure of 7 years. Hence, better not to confuse. Refer the below image for clarity.

RBI Floating Rate Bond

Hence, as of now, if you wish to buy RBI Floating Rate Bonds online, then you have to depend on the below-listed banks and Stock Holding Corporation of India.

  • State Bank of India
  • Bank of Baroda (Including Vijaya Bank and Dena Bank)
  • Bank of India
  • Bank of Maharashtra
  • Canara Bank (Including Syndicate Bank)
  • Central Bank of India
  • Indian Bank (Including Allahabad Bank)
  • Indian Overseas Bank
  • Punjab National Bank (including Oriental Bank of Commerce and United Bank of India)
  • Punjab & Sind Bank
  • Union Bank of India (including Andhra Bank and Corporation Bank)
  • UCO Bank
  • HDFC Bank Ltd.
  • ICICI Bank Ltd.
  • IDBI Bank Ltd.
  • Axis Bank Ltd.
  • Stock Holding Corporation of India

Using the respective bank’s internet banking facility, you can easily buy RBI Floating Rate Bonds online. Take for example, in the case of HDFC, you can find the option to buy. You have to login to HDFC Bank internet banking, click on the tab “Transact” and there you will find a tab “Invest in RBI Bonds”. Once you click this option, then you will find the below screen. Using this, you can easily buy RBI Floating Rate Bonds online.

Buy RBI Floating Rate Bonds Online

I hope this information is sufficient for you all to buy RBI Floating Rate Bonds online.

10 Responses

  1. Thank you for this informative article.
    I am looking for clarification as to If we purchase Rbi bonds from various banks listed, do we receive the coupon rate as issued by Rbi for the period, OR we receive a lesser coupon rate because we are buying it from a other institution?

    Regards

    1. Dear Kala,
      You will proportionate payment based on your days of holdings at first interest payment cycle.

  2. sir, am holding rbi 7.1% RFRB JOINTLY with my daughter in law. Being senior citizen,77 yrs now , can I redeem in after 4 years i.e.
    at my 81 years in 2026, as age is recognized on date of redemption?

      1. tks for conformation. one more observation.. to buy in joint names only physical mode of submission of application is allowed with
        cheque payment. no online facility is permitted .

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