What are Floating-rate bonds?

Imagine investing in a debt investment where the interest rate differs throughout the tenure.

As the name suggests, they offer variable (different at different periods) interest rates during their tenure.

Governments, Corporates or Banks can issue floating-rate bonds.

Here’s an example:

Suppose you have invested in May and the interest for May to November is 6%

The interest for December to Next year June can be 4%

The interest for July to next year January can be 6.7%

Therefore, your interest rate can change. It can either increase or decrease during your tenure.

Characteristics of Floating-rate bonds

Let us learn about the characteristics of Floating-rate bonds!

For how long do you need to invest?

The maturity period for floating-rate bonds is seven years.

Where can you find a floating-rate bond to invest in?

You can invest in floating-rate bonds through banks if they are issued by banks and with a Demat account if you invest in bonds issued by the government or corporate.

Please read our guide to learn about Demat account here.

What are the interest rates offered by floating-rate bonds?

Floating rate bonds offered by the RBI offer an interest rate of 8.05% per annum between July 2023 to December 2023. Learn more

Interest rates for floating-rate bonds keep changing and are announced on the website of RBI (if government bond), specific banks (if bank bond) or brokers (if corporate bonds).

There is a floor (minimum interest rate) and a cap (maximum interest rate) between which the interest rate moves for these bonds.

The coupon (interest rate) offered by government floating-rate bonds is 0.35% higher than the NSC (National Savings Certificate) rate. (as per 2022). Learn about NSC through our guide.

What is the minimum amount you can invest?

You can invest a minimum of ₹1000 in a floating-rate bond.

Your investments should be in multiples of ₹1000.

This means your investment can be ₹1000, ₹2000, ₹5000 etc

Any number with a 000, in the end, can be your investment

Are there any additional returns for the Senior Citizens?

There are no additional returns for senior citizens, but the maturity period is shorter for them.

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