RBI Floating Rate Savings Bonds Explained
"RBI bond" gets used loosely enough in everyday conversation that people searching for the Floating Rate Savings Bond (FRSB) and people looking for Sovereign Gold Bonds sometimes land on the wrong product. They're both issued by the RBI on the government's behalf, and that's roughly where the similarity ends. Here's how FRSB actually works.
What FRSB is
The RBI Floating Rate Savings Bond, 2020 (Taxable) is a government savings instrument for resident individuals, sold through the RBI and a network of authorized banks. Unlike a Sovereign Gold Bond, its return has nothing to do with gold prices — it's a pure interest-bearing savings bond with a rate that resets periodically.
How the rate is set
FRSB's coupon is linked to the prevailing National Savings Certificate (NSC) rate, plus a fixed spread over it, and it resets every six months in line with NSC rate revisions. This means your interest income isn't fixed for the life of the bond the way a standard NCD's coupon is — it moves with the NSC benchmark, up or down, at each reset date.
Key features
| Feature | Detail |
|---|---|
| Tenure | 7 years from date of issue |
| Rate reset | Every 6 months, linked to NSC rate + fixed spread |
| Transferability | Non-transferable |
| Tradeability | Non-tradeable — cannot be bought/sold on any exchange |
| Collateral use | Cannot be used as collateral for loans |
| Premature exit | Only for eligible senior citizens, at specified ages/lock-in periods, per RBI's premature redemption rules |
| Interest payout | Semi-annual (cumulative option historically not available on this series) |
The non-transferable, non-tradeable, no-collateral combination is the defining structural trade-off: FRSB offers no liquidity path before maturity except the limited senior-citizen premature redemption window. This is a materially different liquidity profile from a listed NCD or G-Sec, which you can sell on the secondary market at prevailing prices — see how to read a bond price table for how that secondary-market pricing works for tradeable bonds.
Eligibility and how to invest
Resident individuals (singly or jointly) and Hindu Undivided Families (HUFs) are eligible. NRIs are not eligible to invest in this instrument. Investment can be made through RBI Retail Direct or through authorized bank branches acting as receiving offices — see how RBI Retail Direct works for the platform mechanics.
Taxation
FRSB interest is fully taxable as income at your slab rate — there is no tax exemption on this instrument, unlike a tax-free bond. In practice, the TDS mechanics resemble those on ordinary bond interest: TDS applies once your interest crosses the applicable threshold, at 10% with a valid PAN or a higher rate without one, and Form 15G/15H can be submitted to the issuing bank to avoid TDS if your total income is below the taxable limit. See TDS on bond and NCD interest for the general mechanics — the real difference between FRSB and a listed NCD isn't in the TDS treatment, it's that FRSB has no capital-gains dimension at all, since it can't be sold or transferred; it simply matures and redeems at par to the original holder.
FRSB vs Sovereign Gold Bonds: don't confuse them
| Factor | FRSB | Sovereign Gold Bond |
|---|---|---|
| Underlying | Cash savings instrument, no linked asset | Tracks the price of gold |
| Rate type | Floating, resets every 6 months (NSC-linked) | Fixed 2.5% p.a. interest, plus gold-price-linked redemption value |
| Tradeable? | No — non-transferable, non-tradeable | Yes — listed and tradeable on exchanges after the initial lock-in |
| Tenure | 7 years, fixed | 8 years, with exit windows from year 5 |
| Tax on maturity | Interest fully taxable; no capital-gains dimension | Historically tax-exempt for original subscribers at maturity — see our dedicated SGB article for current rules |
If your goal is exposure to gold prices, FRSB does nothing for you — you want an SGB or gold ETF (see SGB vs gold ETF). If your goal is a fixed-tenure savings instrument independent of any commodity, with a rate that tracks NSC, FRSB is the relevant product.
Key takeaways
- FRSB is a floating-rate government savings bond, rate-linked to NSC, reset every 6 months — not a gold-linked instrument.
- 7-year tenure, non-transferable, non-tradeable, cannot be pledged as loan collateral — liquidity before maturity is essentially limited to a narrow senior-citizen premature-redemption window.
- Interest is fully taxable at your slab rate, with standard TDS/Form 15G-15H mechanics — but no capital-gains dimension exists since the bond can't be sold or transferred.
- Don't confuse FRSB with Sovereign Gold Bonds — both are RBI-issued but structurally unrelated products.
Related reading: Sovereign Gold Bonds explained · How RBI Retail Direct works · FD vs G-Sec vs Corporate Bond