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      How To Buy RBI Bonds?

      • 5 min read
      • Last Modified Date: April 30, 2024
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      RBI Bonds Overview

      • 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

      Pros of RBI BondsExplanation Cons of RBI BondsExplanation
      Risk-FreeBacked by the government Floating 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 70 6
      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.
      2. Debentures Or Bonds: What’s The Difference & What’s Better?

      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.

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