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Invest In Inflation Indexed Bonds To Beat Inflation


With the stock markets being highly volatile, even moderate risk takers are now attracted to debt instruments given the high interest rate offerings, nonetheless these debt instruments such as FDs come with the disadvantage of not able to provide return at par with inflation and as well as have tax implication.

Invest In Inflation Indexed Bonds To Beat Inflation

So, you as a worried lot taking into account the high rate of inflation, wish to grow your investments at a higher rate than inflation, you can consider investments into Reserve Bank of India's (RBI) Inflation Indexed National Savings Securities-Cumulative (IINSS-C) bond.

The investment option offers a higher payout of 1.5% over and above the CPI-based inflation rate.

It is noteworthy that in the case of deflation, investor will not fetch negative returns.

Interest on RBI bonds decoded

The instrument will in general bear the fixed return of 1.5% and a return equal to the rate of inflation. And even in the case when inflation gets negative, investor will not be getting a return of less than 1.5%

Interest on the investment options gets accrued and is compounded on a half-yearly basis. The cumulative pay-out will be made at the time of redemption and while the interest component is taxable, there is no applicable TDS.

Eligible investor class

Retail investor category-individuals, HNIs, charitable institutions registered under section 25 of the Indian Companies Act and Universities incorporated by Central, State or Provincial Act or declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956)

Nationalised banks as well as private banks can be approached for such investments.

Minimum and maximum investment amount.

In respect of minimum amount, investor needs to park in minimum Rs. 5000 while the maximum limit is Rs. 10 lakh per year for retail investors while for other institutional class, it is Rs. 25 lakhs.


Early withdrawals attract a penalty equivalent to half the coupon rate that applies.

For making applications, individual or institutional investor class needs to download the form from the RBIs website and approach the bank along with KYC documents.

Story first published: Saturday, November 24, 2018, 8:55 [IST]
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