How to Buy RBI Bonds

The RBI savings bonds offer a great investment opportunity for individuals who do not want to take too much risk. They feature extended maturity periods and provide investors with attractive coupon rates. However, the returns are subject to taxation as per the income tax slab rate. 

In this blog, we will walk you through a guide on how to buy RBI bonds online, highlighting the advantages and disadvantages of investing in RBI bonds. 

What Are RBI Bonds?

Since 2003, RBI bonds have been issued to the public with the aim of raising money for different government projects. Often, you can notice bond experts referring to them as Floating Rate Savings Bonds or GOI Taxable Bonds. RBI bonds are among the safest investment opportunities, boasting their own benefits and features.

How to Buy RBI Bonds?

You can follow either the online or offline procedure. Below, we have shared the steps to buy RBI bonds to make the journey easier for you:

Online Procedure

Step 1: Complete the login process by visiting the official portal of RBI Retail Direct or any of the registered bank’s websites. 

Step 2: Look for the ‘Transact’ option.

Step 3: Navigate to the ‘Invest in RBI Bonds’ tab and click on it. 

Step 4: Provide some basic details using the application form like your name, date of birth, investment amount, desired interest payout frequency, bank account details and so on. 

Step 5: Scan and upload the copies of required documents like your Aadhaar card, address proof document (any utility bill), cancelled cheque and other documents, as specified. Mention your PAN details as well. 

Step 6: Verify the ‘Terms and Conditions’ and proceed to the next step by entering an ‘OTP’.

Step 7: Complete the investment either via a cheque or any permitted electronic mode.

Step 8: Submit the form. 

Step 9: Once your investment is approved, you will receive a physical bond certificate issued by the RBI. If you have chosen a bank website for the investment then you can collect the certificate from the respective bank’s nearest branch. 

Step 10: Check your bond asset allocation in a Bond Ledger Account (BLA) maintained on your behalf by the Reserve Bank of India. 

Offline Procedure 

Here’s the traditional method to invest in RBI bonds:

Step 1: Visit any of the banks mentioned below:

• Bank of Baroda (including Dena Bank and Vijaya Bank)
• Indian Overseas Bank
• State Bank of India
• UCO Bank
• Bank of India
• Canara Bank of India 
• Canara Bank (including Syndicate Bank)
• Bank of Maharashtra
• Indian Bank (including Allahabad Bank)
• Punjab National Bank (including United Bank of India and Oriental Bank of Commerce)
• HDFC Bank Ltd
• ICICI Bank Ltd
• Union Bank of India (including Corporation Bank and Andhra Bank)
• Punjab and Sind Bank
• RBI RDG Account
• IDBI Bank Ltd
• HDFC Bank Ltd
• Bank of India

Step 2: Upon visiting a branch, ask for the RBI Bond application form.

Step 3: Complete filling out the information by providing all your personal and banking details. 

Step 4: Attach necessary copies of your Aadhaar card, PAN card, a cancelled cheque and also provide other documents as mentioned.

Step 5: Next, you have to invest the amount. You can complete this payment in cheque, draft, electronic mode or even cash.

Step 6: Submit your application form to the relevant authority. 

Step 7: Once your investment is approved, you will receive a physical bond certificate issued by the RBI.

Eventually, you can monitor your bond investment held in a Bond Ledger Account that is maintained by the RBI. 

Features of RBI Bonds

Here are a few highlights about RBI bonds you need to be aware of before investing:

1. Minimum Investment

You can start buying RBI bonds with as low an investment of ₹1,000. After that, you can increase your investments by multiples of ₹1,000. To date, there is no maximum limit set for these investments. 

2. Interest Rate

The basic nature of coupon or interest rate in the case of RBI bonds is floating. This means that the initially promised rate may change subject to certain external factors. Rate changes can occur every 6 months. All bond owners receive interest payouts semi-annually during the months of July and January, i.e., twice a year.

3. Base Rate

It is a known fact that the RBI bond rates are determined by NSC rates. That being stated, a 35-base-point lead usually positions RBI bonds above NSC interest rates.

4. Payout Options

You can opt for either a cumulative or a non-cumulative interest payment option. If you select the first option, the applicable interest amounts keep on adding and are eventually paid to you by the bond issuer after the maturity of the investment.  

With the non-cumulative payout system, you can set periodic disbursements at regular intervals. Consequently, you receive the coupon payments either annually or bi-annually. 

5. Issue Price

You can buy RBI bonds at par online or as per their face values without paying any premium or avail it at a discount. 

6. Bonds’ Holding Mode

You have to hold your bond possessions in an electronic format. First, the Reserve Bank of India opens a Bond Ledger Account on your behalf and then issues physical certificates. 

7. Transferability

You cannot transfer the ownership status to someone else upon owning RBI bonds. However, you can register a nominee while applying for the bond, who will be entitled to receive the investment ownership in case of your unfortunate demise.

8. Tradability

RBI bond owners are not allowed to trade their holdings in the secondary market. 

9. Loan Facility

You cannot put RBI bonds as collateral to apply for loans. This is because lenders do not extend loan offers against these bonds. 

10. Maturity Period

These bonds come with a 7-year lock-in period. This period is calculated from the date of bond unit assignment. However, senior citizens may withdraw their investments prematurely under specific, permitted circumstances.

Pros and Cons of RBI Bonds

Because of the following reasons, a large portion of investors find it advantageous to invest in RBI bonds:

• No Risk Factor

As the Government of India backs these bonds, you can rest assured that your investment is in safe hands. This way, many people find RBI bonds much more reliable than high-paying corporate bonds. 

• Assured Interest

A certain amount of interest is guaranteed on these bond investments that is compounded annually. Regular interest earnings make these instruments a lucrative investment opportunity. 

• Floating Nature of Interest Calculation

If you own RBI bond units, your returns are closely tied to the interest of NSC. Therefore, as the interest is tied to market conditions, you can expect occasional high rates when the market goes up. 

Similarly, if you are wondering what can be the potential drawbacks of owning RBI bonds, then here are a few pointers to keep in mind:

• Inconsistent Returns 

RBI bonds exhibit a floating rate of return that is subject to change twice a year. Thus, a risk factor persists if the market goes down temporarily. 

• Liquidity Factor

Apart from senior citizens, RBI bonds do not allow regular investors to withdraw their money before maturity. Hence, it can seem inappropriate for certain people who prioritise instant liquidity.

• No Loan Facility

You cannot apply for a loan by offering your RBI bond investments as collateral. 

Final Word

Understanding the intricacies of RBI bonds is crucial if you are considering investing in these instruments. To help you make informed decisions, we have explored both the advantages and disadvantages of investing in these bonds, as well as discussed how to buy RBI bonds. Moreover, you can check out relevant information on annual investment limits in this guide.

Frequently Asked Questions