Available risk free investment avenues

As per the notification issued by the Reserve Bank of India, subscription for an investment instrument viz. Savings (Taxable) Bonds stands terminated. For people who are unaware of these bonds, it was the safest investment instrument available for the residents yielding maximum profit. 

Covid-19 outbreak increased the inflation outlook on the country. Consequently, the government of India is balancing the deteriorating condition of our country. Reserve Bank of India took several steps aiming easy credit to the economy. In 2 decennial the repo rate deduced to the lowest. Repo Rate is the rate at which the central bank lends funds to regular banks. The Central bank’s sole principal tool to control inflation is its repo rate. Since the reductions of repo rate have not established the desired impact, RBI backed up trending savings (taxable) bonds which yielded maximum interest. 

A Risk-Free Investment Option

Every individual of this country attaining superannuation is not covered under the umbrella of Pension perquisites. People often look out for schemes yielding greatest efficiency. There is no proper social security system available at present in India, even for the people retiring from the Public Sector Undertakings. Eventually, dependency increases at each stage for those who are superannuating.  

The Government of India Savings (Taxable) Bonds, also referred to as the RBI bonds, were first introduced in April 2003 at an interest rate of 8%. The interest rate reduced to 7.75% in January 2018. Since these are issued by the government, they’re practically free of credit risk. The interest rate was higher than most of the other savings schemes. RBI bonds are taxable instruments. Consequently, a nominal marginal tax rate (under marginal tax brackets) was imposed on the interest income generated by these bonds. These bonds particularly attracted senior citizens, being free of risks and a facility of premature encashment. In absence of any comparable investment scheme, these bonds suddenly became a viable option for investors due to obvious reasons. Being the only instrument available in the market to yield maximum protected profit, It has always been a golden capture for large investors and people retired from the service sector.

Lament Administration

A sue moto order released by the RBI questioning their credibility towards residents of India. On the evening of 27th may 2020 the bankers were directed to accept any deposit under this scheme till banking hours of 28th May 2020. During this pandemic, investors were finding this scheme quite useful for themselves, especially for those not covered under any pension scheme. A proper timeline should have been provided to the investors if at all this scheme was to be scrapped. Over the last couple of months, the interest on deposit rates had gradually decreased, mostly on small saving schemes. At this present time, everybody wanted to save for the future where their money could secure a substantial return. Interests on parallel investment schemes such as PPF, etc have also vitiated. The people who are struggling to invest in a secure and viable instrument are worst affected. As the interest on small savings instruments was abnormally slashed, the abolition of the RBI Bond is another setback. To yield maximum profit the only mechanism available is to invest at higher interest rates achieved by longer tenure or by taking a higher risk. The only available opportunities for investment purpose provided by the government besides RBI Bonds can be PPF, FDR, NSC, etc.

Conclusion

RBI Bonds offered much more attractive interest rates beyond comparison, being one of the safest investment instruments available to the citizens of India. Considering the above facts, these bonds shall be restored purely on humanitarian grounds. RBI Bonds, could boost the financial strength of Government of India and could fetch reliable income for the citizens who had contributed a large amount of income tax in the kitty of Government of India. Since the only regulation provided by the Reserve Bank of India was unethically scrapped without facilitating sufficient time amid COVID-19, the closure of this scheme is considered to be a major stumbling block to the investors willing to secure their future.