RBI may red-flag Punjab and Sind Bank's Rs 5,500-crore zero-coupon bonds

Bank could be asked to hold it at discounted value in HTM

The Reserve Bank of India (RBI) may red-flag the Rs 5,500-crore zero-coupon bonds issued towards recapitalising (recap) Punjab and Sind Bank (P&SB) in its current form, and ask it to hold the instrument in the held-to-maturity (HTM) portfolio at a discount and not at face value.

“This (structure) has to be reworked. It is bad accounting, and has implications for the broader debt market. You can’t create equity out of thin air,” said a top source.

“It can be abused as an instrument if such accounting norms are allowed,” said another source.

It was, however, pointed that while zero-coupon bonds per se towards