Rate of Interest on Government of India Floating Rate Bond 2028
Distilled Policy Brief
- The interest rate on the Government of India Floating Rate Bond 2028 (FRB 2028) has been set at 6.45 per cent per annum for the half year spanning October 04, 2026, to April 03, 2027.
- The coupon rate of FRB 2028 is determined by adding a fixed spread of 0.64 per cent to the base rate, which is the average of the Weighted Average Yield (WAY) of the last three auctions of 182-day Treasury Bills.
- Floating rate bonds help investors hedge against interest rate volatility as their coupon payments adjust periodically in line with prevailing benchmark yields.
🎯 Prelims High-Yield Examination Points
The interest rate for FRB 2028 for the period October 04, 2026 to April 03, 2027 is 6.45% per annum, calculated using the average WAY of the last three 182-day T-Bill auctions plus a fixed spread of 0.64%.
⚖️ Mains Analytical & Syllabus Linkages
Floating rate bonds serve as an essential instrument for government borrowing management, transferring interest rate risk to the market while offering investors protection against inflationary cycles and fluctuating monetary policy rates.
🎯 UPSC Prelims Practice Drill
With reference to the Government of India Floating Rate Bond 2028 (FRB 2028), consider the following statements: 1. The coupon rate for FRB 2028 remains fixed throughout the entire tenure of the bond. 2. The base rate for determining the coupon of FRB 2028 is linked to the average of the Weighted Average Yield of the last three auctions of 182-day Treasury Bills. Which of the statements given above is/are correct?
- [A] 1 only
- [B] 2 only
- [C] Both 1 and 2
- [D] Neither 1 nor 2
▶ Reveal Official Answer & Analytical Explanation
Statement 1 is incorrect because Floating Rate Bonds (FRBs) do not have a fixed coupon rate; their coupon payments adjust periodically based on prevailing benchmark yields to help investors hedge against interest rate volatility. Statement 2 is correct as the coupon rate of FRB 2028 is determined by adding a fixed spread to a base rate, which is the average of the Weighted Average Yield of the last three auctions of 182-day Treasury Bills.
🏛️ Historical Twin PYQ Anchor (2021)
Consider the following statements regarding the "National Clean Air Programme (NCAP)": 1. It is implemented by the Ministry of Environment, Forest and Climate Change. 2. Central Pollution Control Board acts as the sole regulatory executive body.