How and when the interest on RBI floating rate savings bonds is paid

RBI’s Floating Rate Savings Bonds (FRSBs, 2020 (Taxable)) are among the highest interest-paying government-backed securities. Currently, the interest rate on them is 8.05% for the January to June 2026 period.

Importantly, the interest rate on RBI Floating Rate Savings Bonds, is pegged to the interest rate on National Savings Certificates. As per the latest announcement for the interest rate on small savings schemes, the government has kept the interest rate on NSC unchanged at 7.7%.

The rate of interest on FRSB also includes a spread of (+) 35 bps over the respective NSC rate and the interest rate is reset every six months, on January 1 and July 1.

The RBI’s recent operational guidelines for the FRSB, 2020 (taxable) bonds say, “the Interest on the bonds shall accrue from the date of issue and the interest shall be paid initially from the date of issue of bonds up to 30th June/31st December, whichever is earlier, and thereafter for every half-year period ending 31st December/ 30th June.”

Other note-worthy pointers in respect of interest payment on FRSB

If the interest payment date falls on a non-working Saturday, Sunday or any other holiday, the interest payment will be made on the next working day. The day count convention for payment of interest for the bonds shall be 30/360, added the guideline. This means for interest payment calculation ease, the month will be deemed to have 30 days, while for a year it will be assumed to have 360 days as against the otherwise 364 days.

On maturity, the interest for the broken period/last half-year shall be paid along with the principal.

Also, without the submission of the relevant proofs of exemptions, if any, by the subscriber, tax shall be deducted at source when the interest is paid.

Furthermore, ROs or receiving offices will furnish the TDS certificate for tax deducted on the interest paid to the investor, as prescribed under the relevant provisions of Income Tax Act, 2025, as amended from time to time.

In case of any late/delayed payment of interest for reasons not attributable to the investor, ROs shall compensate the investor at the applicable coupon rate for the period of delay.