With fixed deposit rates steadily declining due to Reserve Bank of India (RBI) rate cuts and abundant liquidity, risk-averse investors are turning their attention to the RBI’s floating rate savings bonds. These bonds currently offer attractive annual yields of up to 8.05% for a 7-year tenure, providing a more lucrative and safer alternative to traditional fixed deposits.“Corporate and bank deposit rates have come down in line after the rate cuts announced by RBI,” Anup Bhaiya, MD and CEO of Money Honey Financial, a Mumbai-based distributor told ET. “However, since the RBI floating rate deposit rates continue to be unchanged at 8.05%, there is higher demand for these deposits from retail investors.”These bonds, issued by the central bank on behalf of the government, are considered highly safe and offer a 35-basis-point premium over returns promised by the National Savings Certificate. Currently, the bonds provide an interest rate of 8.05%, paid semi-annually, with the rate reset every six months. Interest income from these bonds is taxable.Despite their safety, liquidity remains a challenge. “There is no premature withdrawal option, and these bonds cannot be used as collateral for borrowing, and hence, investors must be sure to buy and hold them until maturity,” explained Harshvardhan Roongta, CEO of Roongta Securities. The minimum investment amount is ₹1,000, with no upper investment limit.Following RBI’s cumulative 50 basis points rate cut since February, both banks and deposit-taking non-bank lenders have reduced deposit rates by 25 to 100 basis points. The current 10-year government bond benchmark yields 6.22%. For comparison, Bajaj Finance, rated AAA, offers 7.25% for deposits between 24 to 60 months, while SBI pays 6.3% for deposits spanning 5 to 10 years. Senior citizens can earn 50 to 100 basis points more.Investors can purchase these bonds through the RBI retail direct website, distributors, or private bank websites. “These bonds help you earn a lucrative 180 basis points over the 10-year benchmark government bond, while over fixed deposits and corporate deposits these bonds help you earn around 65-150 basis points more,” said Vikram Dalal, Managing Director of Synergy Capital.