IDBI to pay interest on the pre-1992 Deep Discount Bonds: FM

IDBI will pay interest on Deep Discount Bonds issued in 1992 that have not been redeemed, Finance Minister Pranab Mukherjee informed the Rajya Sabha today.

Replying to questions, Mukherjee said the erstwhile Industrial Development Bank of India (IDBI) had issued Deep Discount Bond (Series-I) in March 1992.

IDBI issued the bonds at a price of Rs 2,700 per bond and on maturity in 2017 Rs 1 lakh was payable.

"As per the terms of the issue, the investor had the option to withdraw and IDBI had the option to redeem the bond at the end of every 5 years," he said. "IDBI exercised the call option at the end of 10 years."

Of the nearly 11 lakh bond holders, about 10 lakh were paid back the deemed face value of the bond at the end of 10 year period on March 31, 2002, he said.

IDBI has since transformed into a commercial bank and as per the RBI policy, interest rate comparable to savings rate (3.5 per cent) must be paid on unpaid money lying with a commercial bank, he said.

Mukherjee said in terms of section 193 of the Income Tax Act, 1961, tax is required to be deducted at source in case interest income exceeds Rs 2,500 during the financial year. "IDBI is accordingly deducting tax at source at applicable rates from interest income."

IDBI has issued fresh intimation to the remaining 10 per cent bond holders to redeem the bonds, he added.