The Reserve Bank of India (RBI) on Tuesday stated that the rate of interest on the Central government’s Floating Rate Bond (FRB) 2031 applicable for the half year from today, i.e December 7 to June 6, next year shall be 7.69 per cent, per annum.
“It may be recalled that FRB, 2031 will carry a coupon, which will have a base rate equivalent to the average of the Weighted Average Yield (WAY) of the last three auctions (from the rate fixing day i.e. December 7, 2022) of 182 Day T-Bills, plus a fixed spread of one per cent,” mentioned in the released statement by the RBI.
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The central bank of India also added in the release that the weighted average yields will be computed by reckoning 365 days in a year.
Floating Rate Bonds are securities that do not have a fixed coupon rate. They have a variable coupon rate which is re-set at preannounced intervals.
The FRB bonds have a coupon with a base rate equivalent to a weighted average yield of the last three auctions of 182 –day Treasury Bills plus a fixed spread decided by way of auction. On Tuesday, yields on the government securities ended up as traders remained cautious ahead of the central bank’s monetary policy decision.
The 10-year benchmark 7.26 per cent- 2032 bond yield on Tuesday closed at 7.2486 per cent against 7.2254 per cent closed in the previous trading session.
Earlier in the day, RBI’s rate-setting panel revised its forecast for real gross domestic product (GDP) growth downwards to 6.8 per cent. RBI Governor Shaktikanta Das stated that even after this revision in the country’s growth projections, India will remain among the fastest-growing major economy. In its last policy statement on September 30, the RBI’s Monetary Policy Committee (MPC) projected the country’s GDP growth for the ongoing fiscal at 7 percent.
