RBI announces Government of India Floating Rate Bond 2031 interest rate: All you need to know

The Reserve Bank of India (RBI) has announced the interest rate on the Floating Rate Bond 2031 (FRB 2031): The interest on FRB 2031 will be 6.52% per annum for the 6 months from December 7, 2025 to June 6, 2026. The revised interest rate will apply to all outstanding FRB 2031 holdings during this half-year period.

“The rate of interest on Government of India Floating Rate Bond 2031 (FRB 2031) applicable for the half year December 07, 2025 to June 06, 2026 shall be 6.52% per annum,” the Reserve Bank of India (RBI) said in a release on December 5, 2025.

What is FRB 2031?

Floating Rate Bonds are debt instruments with a variable interest rate that adjusts periodically (like every 3 months, 6 months or every year) based on a benchmark like the repo rate or Treasury Bill (T-bill) yields, plus a fixed spread. This allows investors to earn profits and be protected against rising rates by increasing coupon payments when market rates rise.

In simple terms, unlike normal bonds that pay a fixed interest rate on the money you lend, FRBs pay an interest rate that changes over time based on market conditions. The interest, with a small extra amount called a spread, helps protect investors and ensure that they earn competitive interest on their money.

The FRB 2031 is a government security whose coupon (interest rate) is revised every six months based on a transparent formula set as per the RBI framework.

How is the interest rate set for FRBs?

According to the framework, the interest rate is calculated as the average of the weighted average yields of the last three 182-day T-bill auctions, before the date on which rates are to be revised, plus a fixed spread of 1%.

“It may be recalled that FRB 2031 carries a coupon, which has a base rate equivalent to the average of the Weighted Average Yield of last three auctions (from the rate fixing day i.e. December 07, 2025) of 182 Day T-Bills, plus a fixed spread of 1%,” the RBI release said.

Thus,

FRB 2031 interest rate: (Average Weighted Yield of last 3 auctions of 182-day T-bills) + 1% fixed spread

Floating rate bonds vs fixed-rate bonds

FRBs are different from fixed-rate bonds, because:

• They offer protection from rising interest rates
• They are transparent and work based on the RBI framework

The next rate reset will take place on June 7, 2026, using the same formula as stated above.