Sicom To Issue Ssi Bonds In March
Sicom Ltd, along with state industrial development corporations (SIDCs) and state finance corporations (SFCs), will be issuing the first lot of small-scale industries (SSI) bonds by the first week of March.
These bonds can be used by commercial banks to meet priority sector targets.
Shyam Mahale, senior manager, Sicom said the institutions board took the decision to issue the bonds at a board meeting held recently. The decision follows a Reserve Bank of India (RBI) circular dated November 26, 1996 allowing banks to lend indirectly to the priority sector through bonds, thereby reducing their risk exposure. As per the condition laid down by the guidelines, the funds raised are exclusively for advances to small-scale industries.
The issue, which is to be a private placement, is presently being negotiated with about 15 banks. The details of the issue have not been finalised yet.
However, the yield is to be lower than the prevailing prime lending rates but substantially higher than the seven per cent coupon being offered by the Small Industries
Development Bank of India (Sidbi). The tenor has been fixed at five years.
Banks are statutorily required to lend 40 per cent of their advances to the priority sector.
As per the RBI guidelines, up to half of this can be invested in the bonds or in the Sidbi loan scheme subject to the ceiling that the investment should not exceed five per cent of the banks incremental deposits. The remaining half is used for direct lending.
Sicom will also be launching its maiden retail fixed deposit scheme next week.
The scheme, which will be open to the general public, requires a minimum subscription of Rs 5,000, and thereafter in multiples of Rs 1,000.
They will be of three maturities - one year, two year and three year with interest rates at 14 per cent, 14.5 per cent and 15 per cent respectively, payable quarterly. The bonds have been assigned a AA rating by CARE.
The institution hopes to raise Rs 25 crore in the first year.
The funds will be deployed in the wholesale segment, including corporate loans and bills discounting.