RBI fixes 8.05% Interest Rate on Floating Rate Savings Bond, 2020 for July - December Period

02 July 2025: As per the latest announcement by the Reserve Bank of India (RBI), the interest rate on the Floating Rate Savings Bond, 2020 (Taxable) [FRSB 2020 (T)] will be the same at 8.05% for the period July 1- December 31, 2025. This announcement comes in the backdrop of a predictable return environment, allowing households to plan investment strategies with clarity.

With this, FRSBs will continue being an attractive, government-backed alternative to low-yield bank deposits.

Interest Rate Structure

This interest rate includes a fixed spread of 35 basis points over the current National Savings Certificate (NSC) rate, which stands at 7.70%. The interest on these bonds is reset every six months in line with any changes in the NSC rate. However, the 0.35% spread over NSC remains fixed throughout the tenure.

The next interest payout will be made on January 1, 2026.

Key Features of FRSB 2020 (T)

• Backed by the Government of India: Ensures capital protection and guaranteed returns for investors.
• Tenure: Fixed at 7 years.
• Minimum investment: ₹1,000.
• Maximum limit: No upper cap on investment.
• Premature withdrawal: Not allowed for regular investors. Senior citizens, however, can exit early post a lock-in period based on age, subject to a penalty of 50% of interest for the last six months.

Taxation and Liquidity

• Taxable Returns: Interest earned is fully taxable as per the investor’s income tax slab.
• No Section 80C Benefit: Investments do not qualify for tax deductions under Section 80C.
• TDS Applicable: If annual interest income exceeds ₹10,000, Tax Deducted at Source (TDS) is applied.
• Non-tradable: These bonds cannot be traded in the secondary market or pledged as collateral for loans.

Investment Mode

Investors can purchase these bonds through designated banks and the Stock Holding Corporation of India Ltd (SHCIL). The bond holdings are maintained electronically via a Bond Ledger Account (BLA).

With the interest rate holding steady at a relatively attractive level of 8.05%, the FRSB 2020 (T) continues to be a viable option for conservative investors seeking stable income with sovereign backing.

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