Investor Alert! Last chance to earn 7.75% risk-free interest for 7 years

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Updated: May 28, 2020 10:32 AM

To ensure that the investment money is realised by the closing hours on Thursday, banks would accept the Bond applications during the first working hour only today.

GOI Bond, RBI Bond, 7.75 per cent Savings (Taxable) Bonds scheme, risk-free investment, safety of principal, regular incomeAs the Bond provides safety of principal and a regular income, it is popular among risk-averse retail investors.

With the Repo Rate falling to a historic low of 4 per cent following the latest 40 bps rate cut by the Reserve Bank of India (RBI) on May 22, 2020, the Government of India (GOI) has decided to withdraw the 7.75 per cent Savings (Taxable) Bonds scheme with a short notice from the close of banking business on Thursday.

“The Government of India hereby notifies that the 7.75 per cent Savings (Taxable) Bonds, 2018 shall cease for subscription with effect from the close of banking business on Thursday, the 28th of May, 2020,” the RBI said in a notification on Wednesday.

Accordingly, in a notification to the State Bank of India, all nationalised banks, Axis Bank, ICICI Bank, HDFC Bank and Stock Holding Corporation of India Ltd (SHCIL), the RBI said, “Only such applications where funds have been realised by your branches by May 28, 2020 may be processed and the same shall be reported to CAS Nagpur within permissible limit of T+3 days (no later than June 1, 2020).”

To ensure that the investment money is realised by the closing hours on Thursday, banks have reportedly decided to accept the Bond applications during the first working hour only on May 28, 2020. However, you may invest up till 3.30 pm using your demat account.

So, you have very short time left to rush to your bank to invest in the scheme, commonly known as RBI Bonds or GOI bonds, to earn a risk-free interest of 7.7 per cent for the next 7 years.

As the Bond provides safety of principal and a regular income, it is popular among risk-averse retail investors. However, the interest on the Bond is taxable. So, it is more appealing for investors in lower tax brackets,

Launched in 2018, the Bonds are issued for a tenure of 7 years at par at Rs 100 and the minimum subscription was fixed at Rs 1,000, while there is no ceiling on maximum investment.

While Non Resident Indians are not eligible to take benefit of the scheme, domestic investors have the choice to select either non-culumative or cumulative option at the time of investment.

Under the non-cumulative option, interest will be paid on half-yearly basis on 1st February and 1st August of each year during the investment period of 7 years, while the investors, under cumulative option, will get Rs 1,703 (before tax) for every Rs 1,000 invested on maturity at the end of the 7-year investment period.

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