Guaranteed by government: Why FRSBs beat FDs as the new safety net for conservative investors

Fixed deposits (FDs) have long been the go-to choice for conservative Indian investors. But Chartered Accountant Nitin Kaushik is urging savers to look at an often-overlooked option — Floating Rate Savings Bonds (FRSBs) — which offer higher returns, guaranteed safety, and steady income. 

In a recent post on X (formerly Twitter), Kaushik explained why FRSBs could be the ideal low-risk investment: 

• Interest Rate Advantage: Current return is FD+1.5%, translating to 8.05%. 
• Tenure: Comes with a 7-year lock-in period. 
• Payouts: Interest is paid out every 6 months, ensuring steady cash flow. 
• Safety: Backed by the Government of India, making default risk virtually zero. 

“Perfect for those who want safety without entering markets,” Kaushik wrote, adding that FRSBs are higher-yielding than FDs, safer than corporate deposits, and government-guaranteed. 

Why investors should pay attention 

With FD rates peaking and inflation often eating into real returns, investors seeking stability may find FRSBs to be a smart middle ground. Unlike corporate bonds that carry credit risk, these government-backed instruments provide peace of mind along with attractive yields. 

Smart tips for your money

• Think long-term: The 7-year lock-in makes FRSBs ideal for funds you won’t need in the near future. 
• Use for retirement planning: Semi-annual interest payouts can serve as a predictable income stream. 
• Diversify smartly: Don’t put all your money in FDs — allocate a portion to FRSBs for better returns without additional risk. 
• Tax planning: Remember, interest earned is fully taxable. Factor this in when comparing post-tax returns with other instruments. 
• Avoid liquidity crunch: Since premature withdrawal is not allowed (except in limited cases for senior citizens), keep some funds accessible in savings or short-term deposits. 

Case for smart conservative investing 

Conservative investing doesn’t mean settling for less — it means optimising safety and returns in equal measure. In times of volatile financial markets, global uncertainties, and currency fluctuations, conservative products like FRSBs act as anchors in an otherwise unpredictable environment. 

As investors age and active income slows down, such low-risk products serve as a safety net, ensuring that capital remains intact while still generating reliable cash flows. This becomes especially important in retirement, when steady interest payouts can supplement pensions or savings. 

For investors who value safety but don’t want to settle for modest FD returns, Floating Rate Savings Bonds could be the “smarter home” for low-risk money — providing stability in volatile times and a dependable income stream as one grows older.