RBI Fixes Interest Rate on FRB 2031 at 6.64% for June-December Period
RBI Announces Rate of Interest on Government of India Floating Rate Bond (FRB 2031)
The Reserve Bank of India (RBI) has officially set the rate of interest applicable to the Government of India Floating Rate Bond 2031 (FRB 2031). This critical decision, announced on June 5, 2026, defines the yield for a specific six-month period.The rate of interest on FRB 2031 is mandated at 6.64 per cent per annum. This rate will apply to all instruments covering the half year spanning from June 07, 2026, through December 06, 2026.
Understanding the Mechanism of FRB 2031 Interest Rate
The structure of the interest payment on FRB 2031 is intrinsically linked to prevailing short-term market yields. The bond carries a coupon that determines its base rate.This base rate is specifically set as the average of the Weighted Average Yield (WAY) derived from the last three auctions of the 182 Day T-Bills. This mechanism ensures the bond’s yield remains closely aligned with short-term government borrowing costs.
The Role of the Fixed Spread in Bond Coupon Calculation
Integral to the FRB 2031 coupon is a fixed spread component. The base rate, calculated from the WAY of recent T-Bill auctions, must be supplemented by this fixed amount.The RBI has specified that a fixed spread of One per cent must be added to the average Weighted Average Yield. This combined calculation dictates the final interest payment for investors holding the bond during the stipulated period.
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