The RBI has announced that interest rates for its floating rate savings bonds for July to December 2025 will remain unchanged at 8.5%. The interest rate is the same as before, from the period of January to June 2025. In a statement dated July 1, 2025, the RBI said, “Accordingly, the coupon rate on FRSB 2020 (T) for the period July 01, 2025 to December 31, 2025 and payable on January 01, 2026 remains at 8.05% (7.70%+0.35%), unchanged from the previous half-year.”How are the interest rates set?The interest on these bonds is reset twice a year, as per ET.The interest rate of floating rate savings bonds is set at 0.35% more than the National Savings Certificate (NCS), a small savings scheme supported by the government. The NSC currently offers an annual return of 7.7%, unchanged as per the government’s June 30, 2025 announcement, which left interest rates on all small savings schemes, including PPF, NSC, and SCSS, untouched for the July to September quarter.The interest from these bonds is paid out semi-annually, specifically on January 1 and July 1 each year. Investors should note that interest earned is fully taxable, and TDS will apply if the annual interest exceeds Rs 10,000. Moreover, there is no tax deduction benefit available on the investment itself.The next revision in the NSC interest rate is scheduled for September 30, 2025. If a change is made then, it will only affect the RBI bonds from January 1, 2026, the next reset date.
Key features of RBI floating rate savings bonds :
- Investment limit: The minimum subscription amount for the bond is Rs 1,000, with the next investments in multiples of Rs 1,000. However, there is no upper limit in the bonds.
- Tenure: RBI floating rate bond has a tenure and lock-in period of seven years, as per a PIB press release.
- Premature withdrawal: Premature withdrawal is not permitted for most investors, however, senior citizens are granted an exception under specific conditions. Individuals aged 60 to 70 years can opt for early withdrawal after a six-year lock-in. Those between 70 and 80 years can do so after five years, while investors over 80 years become eligible for premature encashment after just four years from the date of investment. In the case of joint holdings or where there are more than two bondholders, premature withdrawal eligibility is determined if any one of the holders meets the required age criteria.
- Penalty: Once the minimum lock-in period has elapsed, eligible investors may surrender the bonds any time after the 12th, 10th, or 8th half-year, depending on their age group. However, the actual redemption payment will be made on the next scheduled interest payout date, which falls on either 1st January or 1st July each year. In such cases of premature encashment, 50% of the interest due for the last six months of the holding period will be deducted as a penalty. Premature redemptions for eligible investors are processed only on the next interest payment date, either January 1 or July 1.
