The Reserve Bank of India (RBI) has kept the Floating Rate Savings Bond (FRSB) interest rate at 8.05%. This follows the Finance Ministry’s decision to maintain the National Savings Certificate (NSC) interest rate at 7.7%, in its quarterly review meeting.
In a statement dated July 1, 2026, the RBI said, “The coupon rate on FRSB 2020 (T) for the period July 1, 2026, to December 31, 2026, and payable on January 1, 2027, remains at 8.05% (7.70%+0.35%), unchanged from the previous half-year.”
The RBI floating rate savings bond interest rate is set at a 0.35% premium over the NSC rate. Since the NSC interest rate is 7.7%, the interest rate of the RBI bond is 8.05% (7.7%+0.35%).
The RBI’s statement came a day after the Finance Ministry decided to keep the interest rates of small savings schemes unchanged.
"The rates of interest on various Small Savings Schemes for the second quarter of FY 2026-27, starting from July 1, 2026, and ending on September 30, 2026, shall remain unchanged from those notified for the first quarter (March 1, 2026, to June 30, 2026) of FY 2026-27," the Finance Ministry said in a notification.
An 8.05% interest rate on RBI floating rate bonds indicates that it is offering a more attractive return than many small savings schemes and bank fixed deposits (FDs).
Check out the interest rates for the popular small savings schemes and the highest 5-year FD rates from banks.
Top small savings scheme interest rates
| Instrument | Interest Rate | Compounding / Interest Payment Frequency |
| Post Office Savings Account | 4.00% | Annually |
| 1-Year Time Deposit | 6.90% | Quarterly |
| 2-Year Time Deposit | 7.00% | Quarterly |
| 3-Year Time Deposit | 7.10% | Quarterly |
| 5-Year Time Deposit | 7.50% | Quarterly |
| 5-Year Recurring Deposit Scheme | 6.70% | Quarterly |
| Senior Citizen Savings Scheme (SCSS) | 8.20% | Quarterly (interest paid quarterly) |
| Monthly Income Account (MIS) | 7.40% | Monthly (interest paid monthly) |
| National Savings Certificate (VIII Issue) | 7.70% | Annually |
| Public Provident Fund (PPF) | 7.10% | Annually |
Source: India Post
| Bank | 5-Year FD Interest Rate (p.a.) |
| Punjab National Bank | 6.35% |
| Canara Bank | 6.25% |
| Indian Overseas Bank | 6.10% |
| State Bank of India | 6.05% |
| Bank of Baroda | 6.00% |
| Bank | 5-Year FD Interest Rate (p.a.) |
| DCB Bank | 7.50% |
| IDFC FIRST Bank | 6.75% |
| Jammu & Kashmir Bank | 6.75% |
| YES Bank | 6.75% |
| RBL Bank | 6.70% |
| Bank | 5-Year FD Interest Rate (p.a.) |
| Suryoday Small Finance Bank | 7.90% |
| Jana Small Finance Bank | 7.77% |
| Ujjivan Small Finance Bank | 7.20% |
| Equitas Small Finance Bank | 7.00% |
| slice Small Finance Bank* | 7.00% |
RBI floating rate bond maturity period
The RBI bond has a 7-year maturity period, sovereign guarantee and no upper investment limit. The bond provides a payout every six months, which means investors can get a regular periodic income. Such features make RBI bonds a better investment option compared to many bank fixed deposits (FD) where deposits are insured up to Rs 5 lakh per depositor, per bank, under the RBI’s Deposit Insurance and Credit Guarantee Corporation (DICGC).
Does the RBI floating rate bond provide a fixed interest rate for 7 years?
Adhil Shetty, CEO, Bankbazaar, told ET Wealth Online RBI bonds do not offer a fixed return for the entire seven-year investment period as its rate is linked to the NSC.
“The interest rate is reset every six months, on January 1 and July 1, based on the prevailing NSC rate. If the government revises the NSC rate during its periodic review, the bond's interest rate also changes at the next reset. This allows investors to benefit if NSC rates move higher, while returns can also fall if NSC rates are reduced,” says Shetty.
Taxation on earning from RBI bonds
Interest earned from RBI bonds is not tax-free as you need to pay tax on it.
Shetty says the interest earned on RBI Floating Rate Savings Bonds is fully taxable as per slab rates.
“It is added to the investor's total income and taxed according to their income tax slab. The investment itself does not qualify for any deduction under Section 80C of the Income Tax Act, 1961. Tax is also deducted at source in accordance with the prevailing income tax rules,” Shetty explains taxation rules of RBI bonds.
Can RBI floating rate bond be made part of investment strategy, including retirement planning?
Harsimran Sahni, head of treasury, Anand Rathi Global Finance, suggests RBI bonds are best treated as tactical allocations rather than core portfolio holdings.
“They may not warrant a permanent allocation within long-term strategies, including retirement planning, given their cyclical suitability. As such, investors and portfolio managers may choose to deploy capital into these instruments opportunistically, rather than incorporating them as a structural component of long-term asset allocation models,” advises Sahni.
