Financial Daily from THE HINDU group of publications
Thursday, Mar 07, 2002
Financial Daily from THE HINDU group of publications Thursday, Mar 07, 2002 |
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Money & Banking
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Corporate Bonds IDBI may cut rate on Flexibonds Dinesh Narayanan
MUMBAI, March 6 INDUSTRIAL Development Bank of India (IDBI) is likely to cut the coupon on its Flexibonds by an average of about 25-basis points. It is also likely to re-introduce the Money Multiplier Bond which was withdrawn in the last issue, sources told Business Line. A 25-basis-point cut in the popular tax-saving instrument would bring down the return on that bond from 9.25 per cent offered last time to nine per cent for a three-year maturity. For a seven-year maturity, the institution had offered 9.75 per cent, which will come down to 9.50 per cent. The tax-saving bond logs almost 90 per cent of subscriptions. A top official said the reduction in yields was being contemplated following the Finance Minister reducing administered rates and the Reserve Bank of India indicating a downward bias on rates. Mr Yashwant Sinha reduced the small savings rate by 50 basis points in the Budget. Even the return on Relief Bonds was pared by a half percentage point. The RBI indicated that it supported the rate moves when it cut its repo rate by 50 basis points on Tuesday. Savers and pensioners had feared exactly this when the Finance Minister reduced interest rates. A pensioner had termed it as the "unkindest cut of them all''. Mr Sinha had also slashed the income-tax benefit on instruments such as Flexibonds and ICICI's Safety Bonds to 10 per cent from 20 per cent. The double hit would mean that not only would returns drop but lesser tax benefits would also pull down the overall yield of savings instruments. IDBI is slated to hit the market again this month with an issue of Flexibonds to raise Rs 250-crore, with a right to retain over-subscription up to Rs 250 crore. The FI is likely to withdraw the Growing Interest Bond. The issue that closed on February 25 had a new instrument called Retirement Bond. The bonds likely on offer this time are the Infrastructure (tax-saving) Bond, the Regular Income Bond, the Money Multiplier Bond and the Retirement Bond.
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