RBI 7.75% Bonds Issue Closes on 28th May 2020

RBI 7.75% Bonds Issue Closes on 28th May 2020

The RBI (Reserve Bank of India) has announced that now 7.75% Savings (Taxable) bonds, 2018 will no more be available for investment from Friday (i.e., 29.05.2020).

The central bank said in its press release that the Government of India, vide Notification F.No.4(28)-(W&M)/2017 dated 27.05.2020, announced that 7.75% Savings (Taxable) Bonds, 2018 shall cease for subscription w.e.f closing of banking business on Thursday, (i.e., 28.05.2020).

That means investors can invest in the RBI 7.75% bonds only today until the end of banking business hours. The said bonds are attractive as they currently offer a higher rate of interest as compared to bank fixed deposits (FDs) and other financial investment instruments that offer an equal degree of safety.

For instance, the State Bank of India (SBI), w.e.f 27.05.2020, is offering 5.1% on 1-year FD and 5.4% on an FD of more than 5 years. Whereas, RBI taxable bonds are offering 7.75% per annum.

However, the bonds come with a long tenure and a 7-year lock-in period. Premature withdrawal is not permitted for normal investors. Premature withdrawal for senior citizens is allowed on the condition that the lock-in period for senior citizens (between 60 to 70 years of age) will be 6 years from the date of issue, senior citizens between 70 to 80 years of age will have a lock-in period of 5 years and any senior citizen, and those who are 80 years and above, will have a lock-in period of 4 years.

Any individual can invest in these bonds without any maximum limit of investment. The minimum investment limit in the bonds starts at Rs. 1,000.

As per RBI, the investor can opt to receive interest payment in cumulative or non-cumulative forms as per their preference. Under the cumulative form, the interest will be payable with the principal amount when the maturity period ends and the interest will be compounded half-yearly. In the case of a non-cumulative form, the interest is payable at half-yearly intervals from the date of issue.

RBI started issuing these bonds w.e.f. 10.01.2018.

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