How To Buy RBI Bonds (2024)

  • Are you interested in adding RBI Bonds to your investment portfolio? These bonds represent a secure investment option in India, offering a fixed rate of return.
  • This guide will walk you through the process of buying these government-backed securities. Whether you’re a seasoned investor or just getting started, we’ll provide you with the essential steps and insights to make informed decisions when purchasing RBI Bonds.
  • In addition to RBI Bonds, individuals have the option to invest their capital in the real estate market if they are looking for fixed income. A promising avenue within this sector is the realm of structured debt investments, particularly in commercial real estate.
  • This avenue offers the potential for substantial returns and a consistent monthly income stream. Structured debt investments in real estate involve tailored financing solutions designed for commercial real estate projects, providing investors with the opportunity to potentially achieve attractive returns and regular earnings.
  • The entry into this investment avenue is accessible with a relatively modest initial amount of 10 lakhs, and it offers the potential for returns ranging from 12% to 20%. These investment opportunities are facilitated through reputable alternative investment platforms like Assetmonk.

What Are RBI Bonds

  • RBI Bonds provide a channel for the public to contribute funds for government projects.
  • They are also referred to as Floating Rate Savings Bonds or Government of India (GOI) Savings (Taxable) Bonds.
  • These bonds offer a secure investment avenue in India, assuring a stable return rate.
  • The Indian market offers a range of RBI bonds, encompassing savings bonds, taxable bonds, capital gains bonds, and floating rate bonds, each presenting unique characteristics and benefits.
  • These bonds are accessible for purchase by individuals, trusts, and institutions and can be held in either dematerialized (demat) form or physical certificates.

RBI Bonds Key Features

Minimum Investment

The RBI bonds’ minimum investment is Rs. 1,000, with the flexibility to invest in Rs. 1,000 multiples. There is zero specified maximum investment.

Interest Rate

  1. Nature: The RBI bonds’ rate of interest is floating and semi-annually paid, specifically in January & July each year.
  2. Rate Calculation: The rate of interest for RBI Floating Rate Bonds is determined by a spread of basis points of 35 above the benchmarked NSC rate. For instance, if the rate of NSC is 6.8%, the RBI Floating Rate Bonds would offer a 7.15% return.
  3. Rate Updates: The RBI Bonds interest rate resets every six months in line with the rate of NSC. The RBI Bond interest rate or RBI floating rate bond interest rate for 1st January 2023, to 30th June 2023, has gotten adjusted to 7.35% and will get paid out on 1st July 2023.

Maturity

RBI Bonds come with a set maturity duration of up to 7 years, and there is a mandatory lock-in period of 7 years starting from the issuance date. Nevertheless, senior citizens have the option for early redemption.

Loan Facility

RBI bonds for obtaining loans are not eligible to be used as collateral, and there is zero provision for availing loans against them

Mode of Holding

RBI bonds get maintained electronically, with the RBI establishing a BLA or Bond Ledger Account for applicants while also providing a certificate that is physical.

Tradability

These bonds are not tradable on the secondary market.

Transferability

RBI bonds’s ownership is non-transferable, but in the event of the bondholder’s demise, it can be assigned to nominees selected during the issuance process

Price Issue

RBI bonds get issued at their nominal face value with zero premium or discount.

Tax

Income generated by RBI bonds is taxable, and TDS (Tax Deducted at Source) is applied when interest payments are made.

Eligibility for RBI Bonds

  • Individuals who are residents of India can invest in RBI Bonds on their own, jointly, on a basis of survivor, or on a minor’s behalf as a guardian.
  • Hindu Undivided Families (HUFs) are also eligible to do RBI Bonds investment.
  • It’s important to note that NRIs are not permitted to do RBI Bonds investments.

Pros and Cons of RBI Bonds

How To Buy RBI Bonds (5)
Pros of RBI BondsExplanationCons of RBI BondsExplanation
Risk-FreeBacked by the governmentFloating Interest RateRBI Bonds have a floating interest rate that changes semi-annually
Guaranteed InterestFixed and guaranteed interest paymentsLiquidity ConstraintsNot all investors have the option for premature redemption
Floating Rate AdvantageInterest rate is linked to NSC rates, potentially providing higher returns when market rates are favorableCollateral LimitationsRBI Bonds for obtaining loans cannot serve as collateral.

Necessary Documents for RBI Bonds Investments

Individual InvestorsHUF InvestorsMinors
Properly completed application formProperly completed application formThe application form should be appropriately completed by the minor’s guardian or parents
PAN cardHUF’s PAN cardMinor or guardian’s PAN card
Address proof (Aadhaar card or Passport).HUF’s address proofMinor’s or guardian’s address proof
Bank account’s canceled chequeVoided bank account checkBirth certificate of the minor with the guardian’s signature
List of HUF’s coparceners with the Karta’s signature

RBI Bonds’ Premature Withdrawal

Senior citizens are eligible for early redemption based on their specific age categories.

Age Categories (in years)Withdrawal Premature (in years)
60 to 706
70 to 805
More than 804

Early Withdrawal of RBI Bonds Penalty

In the event of premature withdrawal, 50 percent of interest accrued and payable over the past six holding months will get deducted as a penalty.

Where to Purchase RBI Bonds

You can obtain RBI Bonds via approved banks plus the SHCI or Stock Holding Corporation of India. This roster of authorized SHCI and banks comprises:

Stock Holding Corporation of India
Axis Bank Ltd.
IDBI Bank Ltd.
ICICI Bank Ltd.
HDFC Bank Ltd.
UCO Bank
Bank of Maharashtra
BOI
Indian Bank (Including Allahabad Bank)
Punjab National Bank (United Bank of India & Oriental Bank of Commerce)
Punjab and Sind Bank
Union Bank of India (Andhra Bank & Corporation Bank)
Indian Overseas Bank
Canara Bank
State Bank of India
Bank of Baroda (Including Vijaya Bank and Dena Bank)

Procedures for Purchasing RBI Bonds

How to purchase RBI Bonds? There are two ways: online and offline.

Online Procedure

How to buy RBI Bonds online?

  1. Log in to the Online Portal for RBI Retail Direct or the net banking facilities of any listed banks.
  2. Choose ‘transact’ from the dropdown menu.
  3. Select ‘Invest in RBI Bonds’ tab.
  4. Complete the form with the required investment amount, personal information, bank account details, and interest payment preference.
  5. Upload documents like identity proof, address proof, PAN number, etc.
  6. Review and accept the T&C, and authorize the transaction with an OTP.
  7. Make the investment payment via electronic means or cheque.
  8. Select “Continue” and subsequently proceed to “Submit”.
  9. Post successfully submitting the form, you will be issued a physical bond certificate by either the agency bank or RBI, and concurrently, the bonds will get recorded electronically and stored in the BLA or Bond Ledger Account maintained by the agency bank or RBI.
  • Offline Procedure
  1. Go to any of the specified banks or SCHI (Stock Holding Corporation of India).
  2. Obtain the application form for RBI Bond
  3. Fill the application form with investment amount, personal details, bank account details, etc.
  4. Include necessary documents like identity proof, address proof, PAN number, plus others as required.
  5. Make the investment payment through electronic means, draft, cheque, or cash.
  6. After that, you must do the submission of the form.
  7. Upon submission, applicants will be issued a physical bond certificate by either the agency bank or RBI, while the bonds themselves will get recorded electronically and stored in the BLA or Bond Ledger Account maintained by the agency bank or RBI.

Bottom Line

In conclusion, purchasing RBI Bonds is a straightforward process that offers a secure investment opportunity with guaranteed returns. Whether you’re a novice investor looking to start small or an experienced one seeking to diversify your portfolio, RBI Bonds provide a stable avenue for financial growth. With multiple options for investment and convenient methods to buy these bonds, individuals can make the most of their financial resources.

By understanding the steps outlined in this guide and exploring the various channels available for acquiring RBI Bonds, you can make informed decisions and embark on a journey toward financial stability and growth. So, take the initiative, invest wisely, and secure your financial future with RBI Bonds.

In India, Assetmonk stands out as an exceptional alternative investment platform, offering a wide array of attractive avenues for savvy investors. Among these opportunities, one can explore the realm of structured debt in commercial real estate and a meticulously crafted selection of alternative investment choices. With a minimum investment of 10 lakhs and an assured IRR of 17 percent, Assetmonk provides exclusive and tailored investment options to its valued clients.

Related Articles

  1. Non-Convertible Debentures (NCDs) Vs Bonds in India.

FAQs

Q1. Is premature redemption allowed for joint holders if any one of the holders comes under the senior citizen category?

A. Indeed, under such circumstances, premature redemption will be granted in accordance with the age category of the eligible holder.

Q2. Is TDS deducted at source on RBI bonds?

A. Yes, taxes are deducted at the source during the bond purchase.

Q3. Can an investor invest in cash in RBI bonds?

A. Cash investments up to ₹20,000 are permissible for RBI Bonds. For investments exceeding ₹20,000, investors can opt for payment through cheques, demand drafts (DD), or other electronic payment methods.

Q4. What is the maximum investment in RBI bonds?

A. The minimum investment amount for RBI Bonds is ₹1,000, and you can invest in increments of that amount.

As an expert in financial investments, particularly in the Indian market, I can confidently share insights on the concepts mentioned in the article about adding RBI Bonds to an investment portfolio.

RBI Bonds Overview: RBI Bonds, also known as Floating Rate Savings Bonds or Government of India (GOI) Savings (Taxable) Bonds, serve as a secure investment avenue in India. These bonds allow the public to contribute funds for government projects, providing a stable return rate. The Indian market offers various types of RBI bonds, including savings bonds, taxable bonds, capital gains bonds, and floating rate bonds.

Key Features of RBI Bonds:

  1. Minimum Investment: The minimum investment for RBI Bonds is Rs. 1,000, with the flexibility to invest in multiples of Rs. 1,000.
  2. Interest Rate: The interest rate is floating and paid semi-annually, with the rate determined by a spread of basis points above the benchmarked NSC rate.
  3. Maturity: RBI Bonds have a set maturity duration of up to 7 years, with a mandatory lock-in period of 7 years. Senior citizens may opt for early redemption.
  4. Loan Facility: RBI Bonds cannot be used as collateral for obtaining loans.
  5. Mode of Holding: Bonds can be held either in dematerialized (demat) form or physical certificates.
  6. Tradability and Transferability: RBI Bonds are not tradable on the secondary market, and ownership is non-transferable except in the event of the bondholder's demise.
  7. Price Issue: Bonds are issued at their nominal face value with no premium or discount.
  8. Taxation: Income generated by RBI bonds is taxable, and TDS (Tax Deducted at Source) is applied when interest payments are made.

Eligibility for RBI Bonds: Individuals who are residents of India, Hindu Undivided Families (HUFs), and minors (with guardians) are eligible to invest in RBI Bonds. Notably, NRIs are not permitted to invest in RBI Bonds.

Pros and Cons of RBI Bonds:

  • Pros: Risk-free investment, guaranteed and floating interest rates, and government backing.
  • Cons: Liquidity constraints, non-tradability, and taxation on generated income.

Documents Required for RBI Bonds: Individual investors, HUF investors, and minors (with guardians) need to submit relevant documents such as PAN cards, address proofs, and canceled cheques.

Premature Withdrawal and Penalty: Senior citizens can opt for early redemption based on specific age categories, with a penalty of 50 percent of interest accrued over the past six holding months in case of premature withdrawal.

Where to Purchase RBI Bonds: RBI Bonds can be obtained through authorized banks and the Stock Holding Corporation of India (SHCI). A list of authorized banks includes Axis Bank, HDFC Bank, State Bank of India, and others.

Procedures for Purchasing RBI Bonds: The article outlines both online and offline procedures for purchasing RBI Bonds. The online process involves using the RBI Retail Direct portal or the net banking facilities of listed banks. The offline process requires visiting specified banks, obtaining the application form, and submitting it along with the necessary documents.

Bottom Line: Purchasing RBI Bonds is portrayed as a straightforward process offering secure investment opportunities with guaranteed returns. The article encourages investors, whether novice or experienced, to explore the diverse investment options provided by RBI Bonds.

Additionally, the article introduces Assetmonk as an alternative investment platform in India, highlighting its offerings in structured debt investments in commercial real estate with a minimum investment of 10 lakhs and an assured IRR of 17 percent.

Related Articles: The article references non-convertible debentures (NCDs) vs. bonds in India and includes a section of frequently asked questions (FAQs) covering topics like premature redemption, TDS deduction, cash investments, and maximum investment limits.

In conclusion, the comprehensive guide aims to empower readers with the knowledge needed to make informed decisions regarding RBI Bonds and alternative investment opportunities in the Indian financial landscape.

How To Buy RBI Bonds (2024)

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