Today is the last chance to invest in the RBI's 7.75 per cent bonds as the government has decided to withdraw the Savings (Taxable) Bonds scheme on account of declining interest rates. The government will no longer sell its savings bonds from the close of banking business on Thursday. The debt is considered safe among investors, especially retired employees, and offers a higher interest rate compared to other financial instruments including fixed deposits. "The Government of India (GoI), dated May 27, 2020, hereby announces that 7.75% Savings (Taxable) Bonds, 2018 shall cease for subscription with effect from the close of banking business on Thursday, the 28th of May 2020," RBI said in a notification on Wednesday. The Reserve Bank of India too has notified the Cessation of 7.75 per cent Savings (Taxable) Bonds, 2018.
The interest on these bonds is taxable. The bonds are issued at par at Rs 100. The minimum subscription was fixed at Rs 1,000. According to the scheme, the bonds are repayable on the expiration of seven years from the date of issue. The interest rate on bank fixed deposits as well as lending rates are on decline with the Reserve Bank of India lowering the key short-term lending (repo) rate. The repo rate is currently at historic low of 4 per cent.
Meanwhile, State Bank of India (SBI) on Wednesday said that it has cut interest rates on fixed deposits by up to 40 basis points (bps) across all tenors. The new rates on retail term deposits are applicable from May 27. The investors will now earn 5.1 per cent interest on 1 year to less than 2 year deposits. Similarly, deposits of 3 years to less than 5 years will get 5.3 per cent and 5 years and up to 10 years will earn 5.4 per cent interest.
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