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 long-duration high-quality corporate bonds, Government Securities (G-Sec) yields are used as the reference rate — consistently accepted by statutory auditors.
This article presents the FBIL par yield curve as at 30 September 2026 and analyses movement across the curve relative to the prior two quarters — the previous financial year-end (31 March 2026) and the interim half-year point (30 June 2026).
Quarter at a Glance — Q2 FY2027
30 Sep 2026
10yr move
10yr move
1yr move
FBIL G-Sec Par Yield Curve — Quarterly Comparison
The chart below overlays the par yield curves for three valuation dates: 31 March 2026 (FY2026 year-end), 30 June 2026 (Q1 FY2027), and 30 September 2026 (Q2 FY2027). The upward shift from June to September is visible across all tenors, with the steepest moves at the short end.
Source: FBIL G-Sec Base/Par Yield month-end files for 31 March 2026, 30 June 2026 and 30 September 2026 — YTM % p.a. (Annualized). Tenors shown: 1, 2, 3, 4, 5, 10, 15, 20, 25, 30 years.
Reference Rates — 30 September 2026
The table below provides FBIL par yield data at standard actuarial tenors for all three dates, together with the quarter-on-quarter and year-to-date basis point changes.
| Tenor (Yrs) | Mar 2026 | Jun 2026 | Sep 2026 | Chg vs Jun | Chg vs Mar |
|---|---|---|---|---|---|
| 1 | 5.72% | 5.57% | 6.26% | +69 bp | +54 bp |
| 2 | 6.48% | 6.09% | 6.67% | +58 bp | +19 bp |
| 3 | 6.59% | 6.27% | 6.84% | +57 bp | +25 bp |
| 4 | 6.77% | 6.47% | 7.00% | +53 bp | +23 bp |
| 5 | 6.89% | 6.55% | 7.06% | +51 bp | +17 bp |
| 10 | 7.24% | 6.85% | 7.32% | +47 bp | +8 bp |
| 15 | 7.59% | 7.16% | 7.52% | +36 bp | −7 bp |
| 20 | 7.84% | 7.38% | 7.73% | +35 bp | −11 bp |
| 25 | 7.88% | 7.42% | 7.79% | +37 bp | −9 bp |
| 30 | 7.87% | 7.47% | 7.83% | +36 bp | −4 bp |
Par yields are shown on the annualized (annual effective) basis as published in the FBIL par yield file.
Historical Trend — 10-Year Par Yield (Quarterly, 2020–Sep 2026)
The interactive chart below plots the quarterly FBIL 10-year par yield since September 2020. This long-term perspective contextualises the current level relative to pandemic-era lows, the 2022 rate-hike cycle, and the easing cycle of FY2025–26.
Source: FBIL G-Sec Base/Par Yield month-end files, quarter-end values at the 10-year tenor, annualized basis. Where the quarter-end was not a business day, the last published date of the quarter is used.
Factors Driving the Q2 FY2027 Yield Rise
Domestic Supply: OMO Sales
The RBI announced plans for Open Market Operations (OMO) sales of approximately ₹1 lakh crore in FY2027 — the largest net annual bond sale in over a decade. OMO sales drain system liquidity and push up yields by increasing the effective supply of government securities. Markets priced this in through Q2, applying persistent upward pressure especially on the 1–5 year segment.
Elevated Crude and Fiscal Risk
Brent crude traded above $82/bbl for much of the quarter, rekindling concerns about India's import bill and fiscal slippage. Higher crude raises headline CPI, constrains the space for further RBI rate cuts, and increases the market's risk premium on government bonds.
Global Spillover — US Treasury Yields
The US 10-year Treasury yield rose to approximately 5.29% by late September 2026 — near its highest level in over a decade — driven by sticky US inflation and a resilient labour market. Elevated US yields tighten the spread differential with Indian G-Secs, reducing the relative attractiveness for foreign portfolio investors (FPIs) and adding to domestic yield pressure.
RBI Easing Pause
Following rate cuts in February and April 2026 (cumulative 50 bps), the RBI held the repo rate steady at subsequent MPC meetings, citing external uncertainty and upside inflation risks. The pause tempered any further curve bull rally, particularly at the short end.
Actuarial Implications — Valuations at 30 Sep 2026
Lower DBO vs June 2026
For companies valuing gratuity, leave encashment, pension, or PRMB obligations at 30 September 2026, the discount rate will be higher than at 30 June 2026 by approximately 35–60 bps (depending on the duration of obligations). This directly reduces the Defined Benefit Obligation (DBO), as the present value of future benefit payments falls with higher discount rates.
As a rough guide: a 50 bps increase in the discount rate reduces the DBO of a scheme with a 10-year modified duration by approximately 4.5–5.0%. For a company carrying a DBO of ₹10 crore, this translates to a reduction of ₹45–50 lakhs — a meaningful actuarial gain flowing through OCI.
Actuarial Gains Through OCI
Under Ind AS 19 and IAS 19, changes in DBO due to experience adjustments and changes in financial assumptions (including the discount rate) are recognised in Other Comprehensive Income (OCI); under AS 15 they are recognised in the profit and loss account. The yield rise in Q2 FY2027 will generate an actuarial gain for most companies — partially offsetting prior-quarter actuarial losses recorded in FY2026 when yields were lower.
Half-Year vs Annual Valuations
Companies that carry formal actuarial valuations at both 31 March and 30 September (for interim financial reporting) must engage their actuary to update all financial assumptions. The discount rate change is the dominant driver of DBO movement for Q2, though the interest cost (unwinding of discount) will also reflect the higher opening discount rate from June 2026.
Duration Matching
The steep short-end rise is a reminder that the discount rate is the rate corresponding to the estimated duration of the obligation. A gratuity scheme with average duration of 9-10 years will reference a 10-year par yield (7.32% at Sep 2026), while a mature pension scheme with 15-year duration references approximately 7.52%. Companies should select rates consistently with the duration profile of each specific scheme.
| Scheme Type | Typical Duration | Reference Tenor | Sep 2026 Rate | Jun 2026 Rate | Change |
|---|---|---|---|---|---|
| Gratuity — High attrition | 5–7 yrs | 5–7 yr | 7.06–7.26% | 6.55–6.76% | +51–50 bp |
| Gratuity — Low attition | 8–12 yrs | 10 yr | 7.32% | 6.85% | +47 bp |
| Leave Encashment | 4–8 yrs | 5–8 yr | 7.06–7.26% | 6.55–6.83% | +51–43 bp |
| Pension / PRMB | 12–20 yrs | 15–20 yr | 7.52–7.73% | 7.16–7.38% | +36–35 bp |
What to Watch in Q3 FY2027 (December 2026)
- RBI MPC meeting outcomes: any further rate hold or unexpected cut would strongly influence the short end of the yield curve
- OMO sales calendar: pace and timing of the RBI's ₹1 lakh crore OMO sales programme through H2 FY2027
- US Fed trajectory: Federal Reserve rate decisions and guidance on the pace of US rate cuts in late 2026
- Crude oil and the fiscal deficit: India's oil import bill and its implication for H2 FY2027 government borrowing
- JP Morgan GBI-EM rebalancing: FPI flows into India government bonds under the index-driven allocation can provide a counterbalancing bid
About This Data Series
Kapadia & Kochrekar publishes reference G-Sec par yield tables quarterly, aligned with Indian financial year reporting periods. Our March 2026 edition covers the FY2026 year-end curve with full commentary on the post-MPC yield spike.
For a historical perspective, our interactive discount rate tool plots FBIL par yields by quarter and by tenor for every quarter since December 2021, useful for understanding the multi-year context of your obligation's discount rate assumption.
Kapadia & Kochrekar provides AS 15, Ind AS 19 and IAS 19 actuarial valuations for gratuity, leave encashment, pension, and PRMB obligations across India. For a valuation quote or to discuss the discount rate assumption for your specific scheme, please contact us.