For actuarial valuations under the applicable accounting standards — AS 15, Ind AS 19 or IAS 19 — the discount rate must reflect the yield on high-quality corporate bonds of a duration consistent with the estimated term of the benefit obligation. In India, in the absence of a sufficiently deep market in high-quality long-duration corporate bonds, Government Securities (G-Sec) yields are used as the reference rate — a practice consistently accepted by most auditors.
The data below is sourced from FBIL (Financial Benchmarks India Pvt. Ltd.) — the RBI-designated benchmark administrator — specifically the G-Sec Base/Par Yield curve (annualized basis) published as at 31 March 2026.
FBIL G-Sec Yield Curve — 31 March 2026
The chart below plots the FBIL G-Sec par yield curve (annualized) at quarter-year tenors from 0.25 to 30 years as at 31 March 2026. The curve is upward-sloping across the 1–30 year range, with a local hump around 7 years before flattening beyond 15 years.
Source: FBIL G-Sec Base/Par Yield, 31 March 2026. YTM % p.a. (Annualized).
Reference Rates at Standard Actuarial Tenors
The table below presents FBIL par yields at round-year tenors. The appropriate rate for your specific scheme depends on the Macaulay Duration of your benefit obligation, computed by your actuary using the Projected Unit Credit method.
| Tenor | FBIL G-Sec YTM (% p.a.) |
|---|---|
| 1 year | 5.72% |
| 2 years | 6.48% |
| 3 years | 6.59% |
| 4 years | 6.77% |
| 5 years | 6.89% |
| 6 years | 7.14% |
| 7 years | 7.23% |
| 8 years | 7.16% |
| 9 years | 7.06% |
| 10 years | 7.24% |
| 12 years | 7.36% |
| 15 years | 7.59% |
| 20 years | 7.84% |
FBIL G-Sec Base/Par Yield at round-year tenors, YTM % p.a. (Annualized) basis.
How the Discount Rate Is Selected for Your Scheme
The actuary computes the Macaulay Duration of your benefit obligation using the PUC method — the weighted average time to payment of each unit of benefit, discounted at the current rate. The yield at that duration is selected from the G-Sec curve.
Typical duration ranges for Indian employee benefit schemes:
- Gratuity / Leave encashment (high attritions / advance aging): 2–5 years
- Gratuity / Leave encashment (medium attritions / medium aging): 5–10 years
- Gratuity / Leave encashment (low attritions / young aging): 10–15 years
- Defined benefit pension: 10–20 years — long-tail payments extending well into retirement
Sensitivity Analysis — Discount Rate
Ind AS 19 (para 145) and IAS 19 require disclosure of the sensitivity of the DBO to changes in significant actuarial assumptions. At the 7-year reference point (7.23% p.a.), a ±50 basis point change produces approximately:
| Change in Discount Rate | Approximate Impact on DBO | Direction |
|---|---|---|
| +50 bps → 7.73% | Decrease of ~4.5–5.5% | Liability reduces |
| −50 bps → 6.73% | Increase of ~4.5–5.5% | Liability increases |
The sensitivity percentage varies with duration — longer duration schemes show larger DBO movement for the same rate change (assumed approx 10 year term for obligation in above example).
Movement Since December 2025
G-Sec yields have risen since the December 2025 valuation date. The 10-year par yield moved from 6.78% at 31 December 2025 to 7.24% at 31 March 2026 — an increase of approximately 46 basis points. For companies with a March 2026 year-end, this rate increase will generally produce a lower DBO compared to December 2025, all else equal — a favourable balance sheet movement.
Frequently Asked Questions
Can I use a corporate bond yield instead of G-Sec?
Ind AS 19 and IAS 19 (para 83) state that the rate should be determined by reference to market yields on high-quality corporate bonds, and that where no deep market exists in such bonds, government bond yields are used. AS 15 (para 78) refers directly to government bond yields. In India, the G-Sec yield is the universally accepted reference. A small spread for AA-rated corporate bonds may be applied where client auditors specifically require it.
What if my company has a non-March year-end?
The discount rate must be determined as at the valuation date (your balance sheet date). Kapadia & Kochrekar publishes reference yields at each quarter-end. For interim dates, we use the FBIL data as at your specific valuation date.
Does the same rate apply to all benefits?
No. Each benefit has its own duration, and therefore its own discount rate. Gratuity, leave encashment, pension, and PRMB will typically use different rates from the curve, though in practice the difference between adjacent rates is small enough that many actuaries use a single blended rate for companies with both gratuity and leave obligations.