RBI Relief Bonds are instruments that are issued by the RBI, and currently carry an 8% of interest, which was reduced from 9 per cent early this year. The interest is compounded half-yearly. Maturity period of RBI Bonds is five years, and interest received is tax-free in the hands of the investor.

RBI Bonds are not very suitable if you are looking for an increase on your investment. Since RBI Bonds carry interest @ 8%, capital appreciation is better in other safe instruments that offer a higher rate of return. However, if safety is of paramount importance to you, you couldn’t ask for a better deal as this is the safest instrument to invest in. In case of the cumulative option, bonds issued at a face value of Rs 1,000 are redeemed at Rs 1,516.

RBI bonds do not offer any protection against inflationary pressures. You can borrow against RBI Bonds by pledging them as security in a bank RBI Bonds are issued by the Reserve Bank of India. These are among the safest instruments available for investment