RBI Floating Rate Savings Bonds: Can NRIs invest in 8.05% government-backed bonds?

RBI Floating Rate Savings Bonds 2020 (Taxable) offer an 8.05% interest rate and are backed by the Government of India, making them a relatively low-risk fixed-income investment. However, while resident individuals can invest in these bonds, Non-Resident Indians (NRIs) cannot purchase them afresh.

Can NRIs invest in RBI floating rate bonds?

According to RBI rules, an individual who is not an NRI can invest in the Floating Rate Savings Bonds in their individual capacity, jointly, on an “either or survivor” basis, or on behalf of a minor as a parent or legal guardian. Hindu Undivided Families (HUFs) are also eligible to invest.

NRIs are not eligible to invest in RBI Floating Rate Savings Bonds 2020 (Taxable). However, there is an exception for investors who become NRIs after purchasing the bonds.

If an existing bondholder becomes an NRI during the investment period, they can continue holding the bonds until maturity. However, the repatriation of interest and maturity proceeds will be subject to applicable provisions under the Foreign Exchange Management Act (FEMA).

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Interest Rate

The current interest rate on the bonds is 8.05% for the period July 1 to December 31, 2026. The RBI reviews the coupon every six months.

The interest rate is linked to the National Savings Certificate (NSC) rate plus 35 basis points. With the NSC currently offering 7.70%, the RBI Floating Rate Savings Bond rate works out to 8.05%.

In its July 1, 2026, statement, the RBI confirmed that the 8.05% coupon for the July-December 2026 period remains unchanged from the previous half-year.

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Tenure and premature redemption

The bonds have a seven-year maturity period from the date of issue. Interest does not accrue after maturity.

Premature redemption is generally not available, but eligible investors aged 60 years and above can access premature redemption subject to the applicable RBI rules and lock-in conditions.

Is RBI Floating Rate Savings Bond Interest Taxable?

Yes. Interest earned on these bonds is taxable according to the investor's applicable income-tax slab. Tax Deducted at Source (TDS) is also deducted at the time of interest payment as per prevailing tax rules.

Therefore, the 8.05% headline rate should not be treated as the investor's post-tax return.

Minimum and maximum investment

The minimum investment is ₹1,000, and additional investments can be made in multiples of ₹1,000. There is no maximum investment limit, allowing investors to deploy larger amounts into the government-backed instrument.

When Is interest paid?

Interest is paid half-yearly. Payments are made on January 1 and July 1 for the respective six-month periods ending December 31 and June 30.

The bonds are also non-transferable and cannot be traded in the secondary market. They are not eligible to be used as collateral for loans from banks, NBFCs or other financial institutions.

For NRIs, the key takeaway is clear: they cannot make fresh investments in RBI Floating Rate Savings Bonds, but an investor who becomes an NRI after purchasing the bonds can continue holding them, subject to FEMA provisions governing the proceeds.

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