Unlike traditional bonds, interest rates for which are fixed at the time of issuance, interest rate on floating rate bonds are pegged to a benchmark rate which resets on a periodic basis. These work extremely well in low interest rate environment with expectations of rising interest rates. Floating Rate Savings Bond, 2020 (Taxable), the latest sovereign issue announced by the RBI will be open for subscription from July 1, 2020.

We recommend between 10-20% of the fixed income allocation in client’s portfolio to be invested in this bond. Also, it is always great to keep track of the mutual fund industry with the best mutual fund distributor software in India.

Evaluating the bond under SLR framework:

Safety - Highest safety –Sovereign

Liquidity - Limited – Minimum lock-in period of 7 years *

No secondary market, not possible to use this security as collateral for taking loan.

* Premature encashment to be allowed only for individual investors in the age group of 60 years and above.

Returns - National Savings Certificate + 0.35%

Floating - Resets every 6 months (no interest rate risk)

Safety-Liquidity-Returns Profile

  • Taxation considered for individual investor in 20% tax bracket)Indicative net yield for MF < 3Y@5% & for >3Y@7%; Indexation at 3.5%
  • Bank FDs: Option to exit with a small penalty;
  • Tax free bonds: traded on exchanges;
  • Corporate FDs: Can liquidate with minor penal charges;
  • MFs: Can redeem anytime – exit load may be applicable

Please click below link to refer to our detailed note on Fixed Income dated May 17, 2020.


What makes these bonds attractive now?

  • We are currently in a low interest rates environment. Since Feb 2019, RBI has cut repo rate by 250 bps from 6.5% to 4.0%. Given the current scenario, floating rate bonds are more attractive than traditional bonds. Investing in traditional bonds will lock the returns at lower levels, however floating rate bonds by design will perform better as interest rates rise (no interest rate risk).
  • An investor falling in 20% tax bracket can earn post tax returns of around 5.7% p.a. (assuming the interest rate remain constant) which is higher than the prevailing yields on debt mutual fund while having a lower risk.
  • Regular cashflows with half yearly intervals.

However, along with these the advisors of today need to be well-versed in the best mutual fund software for IFAs and other innovative technologies of the age to stay ahead of their peers!

Key Features

  • Eligibility: Individuals (including joint holding) and HUFs can invest in this bond. However, NRIs are not eligible.
  • Subscription: Minimum amount of ₹1,000 and in multiples there of. There is no maximum limit. The bonds will be available on tap until further notice.
  • Tenor: 7 years from the date of issuance. Premature encashment to be allowed only for individual investors in the age group of 60 years and above.
  • Interest payment date: Interest shall be payable at half yearly intervals from the date of issue up to 30th June / 31st December. The proceeds shallbe credited to investor’s account on the following day.
  • Interest rate: NSC + 35 bps. Accordingly, the interest rate for the first six-month period 1 July to 31 December comes to 7.15%(6.80% + 0.35%). All future interest rates shall be calculated on NSC rate based on January 01 and July 01 rates that year.

About us

Fintso is a fintech platform that provides solutions to financial entrepreneurs to address their needs of research, advisory, product access and client engagement. We empower entrepreneurs, to do more for their clients while retaining their identity.

The team at Fintso has deep domain expertise on the Indian investment and wealth management space and in cutting edge technology.

Meet the Investment Team

Rajan Pathak
Co-Founder and MD

Rajan was a member of team who launched India’s 1st Multi-Manager and Fund of Funds AMC concept in India. He had also launched India’s 1st Multi Asset, Multi Product “WRAP” Accounts with online action capabilities. These WRAP accounts were Ranked with a 4 Star by Value Research for process and performance. With more than 2 decades of experience in financial markets, Rajan’s accomplishments include establishing successful B2B businesses supporting the financial entrepreneurs. His vast experience & deep understanding of advisor’s need help us build a strong framework of actionable insights.

George Mitra
Co-Founder & CEO

George was part of the Investment Committee and has been instrumental in designing the algorithms for products and advisory in his previous firm. George had helped design the Financial planning software and created the models for Asset Allocation using Efficient frontiers way back in ’00 while in Deutsche Bank. With over 25 years working with Ultra-HNI clients, George has a deep understanding on designing solutions for the end clients.

Kumarpal Jain
Head – 3rd Party products

Over the past 8-years in the Indian financial markets, Kumar has developed an intrinsic understanding of different asset classes and built an excellent product knowledge by working for top wealth management firms. He was a core member of the team that created the processes that were used for fund selection in both these previous organizations and is now working to bring the same level of research and advisory to financial advisors.

Follow us on

Website:    https://www.fintso.com
Linkedin:  https://www.linkedin.com/company/fintso
Telegram: https://t.me/fintso

Contact us on

E-Mail: products@fintso.com
Phone: 022 4897 1500


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