In the search for safe investment options that provide a regular income, investors often look towards government-backed securities. One such popular instrument is the Floating Rate Savings Bond. So, what is a Floating Rate Savings Bond and how to invest in it? These bonds, issued by the Government of India (GOI), are a secure way to invest your money and earn a periodic income in the form of interest. As of 2026, with fluctuating interest rate scenarios, the ‘floating’ aspect of these bonds makes them particularly attractive to risk-averse investors like retirees and those looking for an alternative to traditional fixed deposits.
What is a Floating Rate Savings Bond (FRSB)?
A Floating Rate Savings Bond, currently issued as FRSB 2020 (Taxable), is a debt instrument where the interest rate is not fixed for the entire tenure of the bond. Instead, the rate is reset at regular intervals, typically every six months. This ‘floating’ interest rate is linked to the prevailing rate of another financial instrument, the National Savings Certificate (NSC), plus a fixed spread or margin. This structure ensures that your returns from the bond move in line with the broader interest rate trends in the economy. If interest rates go up, you earn more, and if they go down, your earnings decrease accordingly. The principal amount, however, remains completely safe as it is backed by a sovereign guarantee from the Government of India.
How to Invest in Floating Rate Savings Bonds in 2026
Investing in FRSBs is a straightforward process. You can choose to invest either online through your bank’s net banking portal or offline by visiting a designated branch. Here’s how you can do it:
1. Online Investment
Most major public and private sector banks offer an online facility to invest in FRSBs. The steps are generally as follows:
- Log in to your internet banking account.
- Navigate to the ‘Investments’, ‘Bonds’, or ‘Government Schemes’ section.
- Select ‘Floating Rate Savings Bonds’ or ‘FRSB 2020’.
- Fill out the online application form with your details, nominee information, and the investment amount.
- The amount will be debited from your linked savings account.
- You will receive a digital certificate of holding in your email or it will be available for download in your account.
2. Offline Investment
For those who prefer the traditional method, you can invest by visiting an authorized bank branch (most major public sector banks, and some private banks like HDFC, ICICI, Axis). The process involves:
- Filling out the application form (Form A).
- Submitting a copy of your PAN card and Aadhaar card for KYC.
- Making the payment via cheque, demand draft, or by debiting your account at the branch.
- The bank will provide you with a certificate of holding as proof of your investment.
Key Features of Floating Rate Savings Bonds 2026
Understanding the features of these bonds is crucial before you decide to invest your hard-earned money.
| Feature | Details |
|---|---|
| Issuer | Government of India (GOI), issued by the Reserve Bank of India (RBI). |
| Eligibility | Resident Individuals and Hindu Undivided Families (HUFs). NRIs are not eligible. |
| Tenure | 7 years from the date of issue. |
| Interest Rate | Floating rate, reset every 6 months (on Jan 1st and July 1st). It is pegged to the National Savings Certificate (NSC) rate + 0.35%. |
| Interest Payout | Payable semi-annually on January 1st and July 1st. |
| Investment Limit | Minimum ₹1,000 and in multiples thereof. There is no maximum investment limit. |
| Premature Withdrawal | Allowed only for senior citizens (aged 60 and above) after a certain lock-in period with a penalty. |
| Tradability | These bonds are not tradable in the secondary market and cannot be used as collateral for loans. |
Tax Implications of FRSBs
This is a crucial aspect to consider. The interest earned from Floating Rate Savings Bonds is fully taxable. The interest income is added to your total income for the year and taxed as per your applicable income tax slab. Banks will also deduct Tax at Source (TDS) on the interest payments. However, if your total income is below the taxable limit, you can submit Form 15G or Form 15H to the bank to request that TDS not be deducted.
Who Should Invest in Floating Rate Savings Bonds?
FRSBs are an ideal investment for:
- Retirees and Senior Citizens: They offer a safe and regular stream of income.
- Risk-Averse Investors: The sovereign guarantee makes them one of the safest investment options available.
- Investors Looking for Regular Income: The semi-annual interest payout is great for those who need periodic cash flows.
If you are in a higher tax bracket, you might want to evaluate other options, but for safety and simplicity, FRSBs are an excellent choice. They are a much safer alternative compared to corporate FDs and offer a hedge against interest rate fluctuations. For direct access to other government bonds, you could also explore the RBI Retail Direct Scheme for G-Secs.
Frequently Asked Questions (FAQs)
1. How is the interest rate on FRSB calculated?
The interest rate is calculated by taking the prevailing interest rate on the National Savings Certificate (NSC) and adding a spread of 0.35% to it. This rate is reset every six months, on January 1st and July 1st.
2. Can I withdraw my investment from FRSB before 7 years?
Generally, premature withdrawal is not allowed. However, an exception is made for senior citizens. Investors aged 60-70 can withdraw after 6 years, those aged 70-80 can withdraw after 5 years, and those above 80 can withdraw after 4 years, subject to a penalty.
3. Is the interest on FRSB tax-free?
No, the interest earned on these bonds is not tax-free. It is fully taxable under the head ‘Income from Other Sources’ and is subject to TDS.
4. Can an NRI invest in Floating Rate Savings Bonds?
No, Non-Resident Indians (NRIs) are not eligible to invest in these bonds. The scheme is open only to resident individuals and HUFs.
5. How is the interest on FRSBs paid to the investor?
The interest is paid out semi-annually and is directly credited to the bank account of the bondholder that was provided at the time of application. The payouts happen on January 1st and July 1st each year.