RBI Sets 6.66% Interest Rate on GOI Floating Rate Bonds 2035

The Reserve Bank of India (RBI) has recently announced that the interest rate for the Government of India Floating Rate Bonds 2035 (GOI FRB 2035) will be set at 6.66% per annum. This rate will be applicable for the period from January 25, 2025, to January 24, 2030. The rate is determined based on the prevailing 5-year yield on Government of India securities as of January 24, 2025, reflecting the market conditions.

What is the Government of India Floating Rate Bond 2035?

Issued on January 25, 2005, the GOI FRB 2035 is a long-term investment option available to investors. It was initially a private placement between the Government of India and the Reserve Bank of India (RBI), with the bond issued in exchange for the transfer of subordinated debt from IDFC. One of the key features of the GOI FRB 2035 is that its interest rate is adjusted every five years based on the prevailing 5-year yield on Government of India securities.

This adjustment ensures that the bond remains aligned with the prevailing interest rate environment, offering investors an opportunity to earn a return reflective of the current market conditions.

How Has the Interest Rate Changed Over Time?

The interest rate on the GOI FRB 2035 is subject to periodic adjustments. From January 25, 2020, to January 24, 2025, the bond carried an interest rate of 6.58% per annum. However, starting January 25, 2025, the interest rate has been increased to 6.66% per annum. This small yet significant increase reflects the current economic and market conditions, particularly the 5-year yield on Government of India securities, which influences the rate.

This adjustment marks the bond’s growth in line with the economic environment, offering a fixed spread over the 5-year government bond yield.

What Does This Mean for Investors?

For investors holding the GOI FRB 2035, the interest rate adjustment means that they will see a slightly higher return starting in 2025. As the bond is tied to the 5-year yield of Government of India securities, it offers a predictable income stream, adjusted for prevailing interest rate conditions. Investors benefit from a reliable and consistent return, which is especially important in uncertain economic times.

This bond remains a good option for conservative investors looking for steady returns over the long term, with the security of government backing. The 6.66% rate is a slight increase from the previous period, reflecting the current yield on government securities and providing a stable income stream for the next five years.

How Does This Affect the Market?

The adjustment of the interest rate for the GOI FRB 2035 is a clear reflection of the changing economic environment. It highlights how market yields on government securities directly impact returns for investors holding floating rate bonds. Such changes also signal the Reserve Bank of India’s proactive approach in aligning bond interest rates with market trends, ensuring that government securities remain attractive to investors.

Summary of the news

Why in News	Key Points
RBI sets interest rate of 6.66% for GOI FRB 2035.	Government of India Floating Rate Bonds 2035 (GOI FRB 2035).
Period of new rate: January 25, 2025 – January 24, 2030.	Adjusts every 5 years based on 5-year yield of Government of India securities.
Previous rate: 6.58% (January 25, 2020 – January 24, 2025).	Issued on January 25, 2005.
Issued to the Reserve Bank of India in exchange for subordinated debt from IDFC.	Government of India securities yield-based interest adjustment.
Interest rate provides predictable income for investors.	Bond provides fixed spread over the 5-year yield on government securities.
Increased interest rate reflects market yield conditions.	Bond offers long-term investment option for conservative investors.