RBI Bond Interest Rate: Reserve Bank of India (RBI) has given relief to those investing in floating rate bonds. RBI has increased the interest rate on Government of India Floating Rate Bond 2034 (FRB 2034) from 6.45% to 7.26%. With this increase of 0.81 percent in interest rate, investors will now earn more than before. If you have invested ₹5 lakh in this bond, then you will get interest of around ₹18,150 in the next six months. Let us understand how much you will benefit from this increase in interest rates.
New interest rate implemented from October 30
According to RBI, the new interest rate of 7.26% on FRB 2034 will be applicable for six months from October 30, 2026 to April 29, 2027. Earlier, investors were getting 6.45% annual interest on this bond. That means now the interest rate has increased by 81 basis points.
Why was the floating bond interest rate increased?
RBI has given the reason for increasing the interest rate as the increase in the weighted average yield (WAY) of 182 day treasury bill (T-Bill). The interest rate of FRB 2034 is decided on this basis. For this, a fixed spread of 0.98% is added to the average yield of T-Bill auctions of the last three 182 days. While deciding the interest rate on October 30, the yield of the last three auctions was considered.
In the auction of October 28, the yield of 182 day T-Bill was 6.5140%. Earlier on 14th October it was 6.2563% and on 7th October it was 6.0645%. The average yield of these three is about 6.28%. By adding fixed spread of 0.98% to this, the interest rate becomes 7.26%.
How much interest will be received on investment of Rs 5 lakh?
If you had invested Rs 5 lakh in FRB 2034, then at the first interest rate of 6.45%, you would have got around Rs 16,125 in six months. Now at the new rate of 7.26% this interest will increase to around ₹ 18,150. That means you will get an additional benefit of about ₹ 2,025 every six months. However, this interest rate is not fixed forever. Its next review will be in April 2027 and after that the interest amount may change.
What are RBI Floating Rate Bonds?
Floating rate bonds are such government bonds, whose interest rate does not remain the same for the entire period. In this the interest rate is changed at pre-determined intervals. This interval can be of six months or one year. The interest rate of these bonds is decided by adding a base rate and fixed spread. The base rate may change, but the fixed spread remains the same throughout the term of the bond.
Source: ndtv.in
