RBI Floating Rate Savings Bond stays at 8.05% for July–December 2026 — how it beats most bank FDs
RBI has kept the Floating Rate Savings Bond 2020 (Taxable) at 8.05% for the July–December 2026 half-year, 35 bps above the NSC rate. Here's who should use it and the catches to know before investing.
The interest rate on the RBI Floating Rate Savings Bond (FRSB) 2020 (Taxable) has been reset at 8.05% per annum for the half-year from 1 July to 31 December 2026, unchanged from the previous half-year. The rate is set every six months on 1 January and 1 July.
Why the rate stays at 8.05%
The FRSB rate isn’t fixed by RBI directly — it is formula-linked to the prevailing National Savings Certificate (NSC) rate, at a spread of NSC + 0.35 percentage points. With NSC held at 7.7% for the July–September 2026 quarter (Ministry of Finance’s small savings rate announcement), the FRSB rate works out to 7.7% + 0.35% = 8.05%.
Because the small savings rates were left unchanged for Q2 FY27, the FRSB coupon carries over unchanged into the new half-year too.
Key features
| Feature | Detail |
|---|---|
| Interest rate | 8.05% p.a. (reset half-yearly) |
| Tenure | 7 years |
| Minimum investment | ₹1,000 |
| Maximum investment | No upper limit |
| Interest payout | Semi-annual (1 Jan and 1 July) — no cumulative option |
| Eligibility | Resident individuals and HUFs (NRIs cannot invest fresh) |
| Taxation | Fully taxable at slab rate; no Section 80C or other deduction |
| Premature exit | Allowed only for senior citizens, after a lock-in of 4–6 years depending on age band |
Source: Reserve Bank of India, FRSB 2020 (Taxable) scheme rules; rate formula linked to Ministry of Finance small savings notification.
Who should consider it
Conservative investors who already use up SCSS and PPF limits. SCSS (8.2%) and PPF (7.1%, tax-free) are capped at ₹30 lakh and ₹1.5 lakh a year respectively. The FRSB has no investment ceiling, making it a natural place to park additional safe money once those limits are exhausted.
Savers comparing against bank FDs. Most large bank FDs for 5–7 year tenures currently pay well below 8% (see bank FD rates). At 8.05%, taxable and sovereign-guaranteed, the FRSB is competitive with — and often ahead of — top FD rates for the same risk-free category, though FDs offer more payout flexibility and shorter lock-ins.
Anyone worried about rate direction. Because the coupon resets every six months in line with NSC, FRSB holders don’t get stuck at a low rate if rates rise later, unlike a fixed-rate FD locked in today. The flip side: if the RBI’s rate-cut cycle continues, the coupon could also fall at the next reset in January 2027.
The catches
- No premature exit for non-seniors. Money is locked for the full 7-year term unless you are 60+ (exit after 6 years), 70+ (after 5 years) or 80+ (after 4 years), with a small penalty on the last coupon.
- Fully taxable, no indexation or exemption — unlike PPF’s EEE status, every rupee of FRSB interest adds to your taxable income.
- No cumulative/reinvestment option — interest is paid out only semi-annually, not compounded, so it isn’t ideal for pure wealth accumulation goals.
Use the FD calculator to compare the post-tax, compounded return of a bank FD against the FRSB’s semi-annual payout before allocating fresh savings.
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