Floating-rate bond 2028: RBI sets 6.45% interest rate for October 2026-April 2027; what investors should know
The Reserve Bank of India (RBI) has fixed the interest rate on the Government of India Floating Rate Bond 2028 (FRB 2028) at 6.45% per annum for the six-month period from 4 October 2026 to 3 April 2027.
The rate is higher than the 6.17% coupon applicable to the bond during the previous six-month period, which ended on 3 October 2026.
However, investors should not read the 6.45% rate as a return that will remain unchanged until the bond matures. As the name suggests, the bond has a floating coupon that is reset every six months.
How the floating rate is calculated
The coupon on FRB 2028 is linked to short-term government borrowing rates. According to the RBI, its base rate is the average Weighted Average Yield (WAY) of the last three auctions of 182-day Treasury Bills, calculated from the rate-fixing day. A fixed spread of 0.64 percentage point is added to this base rate.
For the current half-year, this mechanism has resulted in a coupon of 6.45%.
This means the interest rate can change at the next reset. If yields on 182-day Treasury Bills rise, the coupon on the floating-rate bond can increase. If those yields fall, the coupon can decline.
For an investor, this is an important difference from a fixed-rate bond or fixed-rate deposit, where the contracted rate generally remains unchanged for the agreed tenure.
What does 6.45% mean for your investment?
At a 6.45% annualised coupon, an investment of ₹1 lakh would generate ₹6,450 in interest over a full year if the rate remained unchanged for the entire year.
But because the coupon is reset every six months, this calculation should not be treated as the guaranteed income for the remaining life of the bond.
The interest is paid periodically, while the bond itself has a maturity in 2028. Investors therefore need to distinguish between the coupon rate and their overall return from the investment.
The latter can also depend on the price at which an investor buys the security, particularly if it is purchased through the secondary market rather than at issue.
Should investors consider?
The latest reset makes FRB 2028 relevant for investors who want exposure to government securities but do not want to lock themselves into a fixed coupon for the entire remaining tenure.
The floating structure can be useful when short-term interest rates remain elevated or rise because the bond’s coupon can adjust at subsequent resets. The flip side is that investors do not have certainty over the coupon they will receive in future periods.
The bond should also not be confused with the Floating Rate Savings Bonds, 2020 (Taxable). They are separate government-backed instruments and their interest rates are determined under different mechanisms.
For investors evaluating FRB 2028, 6.45% is the coupon for the current six-month period, not a locked-in return until 2028. The next reset will depend on the prevailing yields of 182-day Treasury Bills.
