GoI introduces Floating Rate Savings Bonds

Published: June 27, 2020

On June 26, 2020, the Government of India introduced Floating Rate Savings Bonds.

Highlights

The bond is to replace savings bonds that were offered by GoI till May 28, 2020. The operational guidelines and the details of the bond are to be issued by the Reserve Bank of India.

The bonds are to be available at nationalized banks including State Bank of India and also in other 4 private sector banks.

What is Floating Rate?

Floating Rate is an interest rate that increases and decreases along with the market. It can also be referred as variable interest rate.

The Floating rate loans are to cost less than the fixed rate loans depending on the yield curve. However, the borrower takes interest rate risks for taking a loan at lower rate.

Yield Curve

The Yield Curve shows yield to maturity (or interest rates). An upward yoed curve says that a healthy economic growth is expected. On the other hand, a downward curve warns about a recession.

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