The 7.75% Government of India Savings (Taxable) Bonds were an attractive investment with retired investors who invested their money in this instrument with a lock-in period of four to six years, depending upon the age of the bond holder
The central government on Wednesday announced its decision to stop sale of its savings bonds that used to give 7.75% interest rate on a taxable basis.
The 7.75% Government of India Savings (Taxable) Bonds, also known as RBI 7.75% bonds, was an attractive investment with retired investors who invested their money in this instrument with a lock-in period of four to six years, depending upon the age of the bond holder. For others, there was no premature redemption.
“The Government of India … hereby announces that 7.75% Savings (Taxable) Bonds, 2018 shall cease for subscription with effect from the close of banking business on Thursday, the 28 May, 2020," the Reserve Bank of India said in a notification on its website.
The bonds were issued in January 2018 for residents and Hindu Undivided Family . It was not available for non- resident indians. The minimum value of investment was ₹1,000 with no maximum limit.
RBI 7.75% bonds had a tenor of seven years. However, premature encashment is allowed after six years for people between the ages of 60 and 70; after five years for those between 70 and 80; and four years for those above the age of 80. Premature encashment is not available for those below 60 years of age. However, 50% of the interest rate due and payable for the last six months of the holding period is recovered by the bonds in cases of premature encashment.
The government notified that it is ceasing issuance of these bonds, and not redeeming the already invested. Bond dealers said that the government will end up paying higher interest rates on these bonds when the 10-year G-sec is trading around 6% level. The small savings rates have come down to 7.1%, while banks are offering just 6.75-7% on their deposits.
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