Understanding RBI Bonds

Features of RBI Relief Bonds 

RBI Relief Bonds are special bonds that allow investors to save on tax. Earlier they were known as Savings bonds and their features varied a little. The RBI issues bonds to raise funds for the government. The best and perhaps the only reason to invest in these bonds is the safety that comes with a debt instrument issued by the central bank.

These bonds mature in 6 years. They must be held to maturity because they cannot be traded in the secondary market or transferred. Interest rate is currently 8.5% p.a. compounded every six months. You can opt to receive interest each time or let it accumulate and receive the accrued amount at maturity.  Face value of the bond is Rs 1000.

Investing in RBI Relief Bonds

The bonds can be purchased anytime from RBI offices and designated banks. They can be bought singly, jointly or on behalf of a minor. HUFs can also buy these bonds. NRIs are barred from investing in it. Relief Bonds can be purchased from RBI offices in various cities, SBI and its associates and other nationalized banks across the country. The bonds can be held in the physical form or demat form. There is no cap on the investment amount.

Right for me?

In the monetary sense investing in RBI bonds is not rewarding. Your investments would never catch up with inflation with an interest rate lower than that of FDs of banks but you might still want to consider investing in these if all that matters to you is security of capital. Instruments issued by RBI cannot default because monetary and financial systems of the economy are in its control. It has the right to print money. If you want your investment to beat inflation or at least give better liquidity these bonds must be avoided.


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