The interest rate on the Government of India Floating Rate Bond 2033 (FRB 2033) will be 6.87% per annum for the six-month period from September 22, 2026, to March 21, 2027. The interest rate of FRB 2033 is calculated using a base rate plus a fixed spread of 1.22%. The base rate is the average Weighted Average Yield (WAY) of the last three auctions of 182-Day Treasury Bills (T-Bills) before the rate-fixing date, which is September 22, 2026.
A Government of India Floating Rate Bond (FRB) is a government bond whose interest rate (coupon) is not fixed for the entire life of the bond. Instead, the interest rate is reset periodically according to a specified benchmark.
In simple words
Think of it like this:
Government borrows money → issues FRB → pays interest → interest rate changes periodically according to the formula
For FRB 2033, the coupon is calculated as:
Coupon Rate = Base Rate + Fixed Spread
So, the 6.87% is not necessarily the rate for the whole period until 2033. It applies only to the specified six-month interest period. The rate will be reset for subsequent periods according to the applicable formula.
Why is it called “Floating Rate”?
It is called floating rate because the interest rate can move up or down when the benchmark rate changes. For example, if the relevant T-Bill yields increase, the FRB’s coupon may increase. If T-Bill yields decrease, the coupon may decrease, subject to the terms of the bond.
FRB vs Fixed-Rate Government Bond
| Feature | Fixed-Rate Government Bond | Floating Rate Bond |
|---|---|---|
| Interest rate | Fixed | Changes periodically |
| Coupon | Generally remains the same | Reset according to formula |
| Benchmark | Usually not linked to a changing benchmark | Linked to a specified benchmark |
| Interest-rate movement | Coupon does not change | Coupon can change |
