Floating-rate savings bonds on RBI portal may not be instant hit

Retail investors could be hesitant to invest in floating rate savings bonds, as these specific bonds tend to be profitable only in a rising rate environment, according to market participants.

- ANJALI KUMARI

The Reserve Bank of India has allowed subscriptions for floating-rate savings bonds, 2020, via retail direct - an online portal that enables individual investors to purchase government securities.

Floating-rate bonds, which are interest-bearing and non-tradable, are issued by the government and reach maturity seven years from the date of issuance. The RBI offers an interest rate of 8.05 per cent, which is 35 basis points above the National Savings Certificate rate. Interest on these bonds is paid semi-annually on January 1 and July 1 each year, with no provision for cumulative interest payments.