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 RBI Savings Bonds: A Brief History

The Reserve Bank of India (RBI) is responsible for implementing the monetary policy in India, and offers a range of financial instruments to support this goal. One such instrument is the RBI Savings Bond, which is a government-backed investment product that offers a fixed rate of return.

The history of the RBI Savings Bond goes back to 1960, when the Indian government introduced a series of National Savings Certificates (NSCs) to promote small savings among citizens. The NSCs were initially offered by post offices, and later by designated banks as well.

In 1987, the government introduced the 7.5% RBI Savings Bond, which provided investors with a fixed rate of return. The bonds were available in denominations of Rs. 1,000, Rs. 5,000, Rs. 10,000, and Rs. 50,000, with a minimum investment of Rs. 1,000. Initially, the bonds had a maturity period of 3 years, which was later extended to 5 years in 2003.

Over time, the RBI has introduced several series of savings bonds, each with their own unique features and terms. For example, in 1998, the government introduced the 8% RBI Relief Bond, which aimed to raise funds for the relief and rehabilitation of earthquake victims in Gujarat. Similarly, in 2003, the government introduced the 8% RBI Savings (Taxable) Bonds, which provided investors with a secure investment option that offered a higher rate of return than traditional savings accounts.

In 2018, the government introduced the 7.75% RBI Savings (Taxable) Bonds, which aimed to provide investors with a fixed rate of return and liquidity. These bonds were available in denominations of Rs. 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakhs, and Rs. 1 crore, with a minimum investment of Rs. 1,000. The bonds have a maturity period of 7 years, and can be redeemed prematurely after 5 years.

In 2020, the RBI replaced the RBI Savings Bonds with the Floating Rate Savings Bonds 2020, which offer investors an alternative to fixed-rate savings options. These bonds have a minimum investment of Rs. 1,000 and no maximum limit, and a tenure of 7 years. Investors can exit after the fifth year, and the interest rate is linked to the prevailing rate of the National Savings Certificate (NSC), reset every six months. The interest payment is made semi-annually.

To make the bonds more attractive to investors, the RBI has introduced several key features. For example, the bonds are exempt from tax deducted at source (TDS) for interest income up to Rs. 50,000 per financial year. Additionally, the bonds can be held in the name of an individual or jointly, with a maximum of three holders.

Overall, the RBI Floating Rate Savings Bonds 2020 provide investors with a flexible and attractive savings option, with a variable interest rate that reflects prevailing market conditions. The RBI Savings Bond has a long and significant history, and has played an important role in promoting small savings among Indian citizens. The bonds continue to evolve to meet the changing needs of investors, and remain a popular investment option in India.

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