Coupon Rates On Idbi Bonds On Tap Dip 200 Pts

The coupon rate on one-year bonds available on tap has dropped from 16 to 14 per cent. The five-year bond is now selling at a coupon rate of 15 per cent. They were sold at rates ranging between 16 and 17 per cent before the credit policy.

In the private placement route, the IDBI sells bonds on an outstanding basis. The year's fund requirement is worked out, and the difference between redemption of old bonds and requirement is raised. In this route, it has the flexibility to change coupon rates to match market demand.

This uncertainty over the movement of interest rates is making it difficult for the IDBI to peg the coupon rate for its forthcoming Rs 1,000-crore public issue of bonds.

 

IDBI is now working on a short-term bond of three years while the longest maturity will be 12 years. It does not want to make long-term commitments. This is significant because the institution had earlier come up with bonds of 20- to 30-year duration.

The IDBI chairman had earlier indicated a coupon rate of 15 per cent for its forthcoming public issue. But the institution is likely to peg the rate at around 15.5 per cent with marginal difference in rates on different schemes like the regular income and the deep-discount bonds.

Though the RBI's decision to cut the CRR by 2 per cent will infuse Rs 8,000 crore into the system, FIs feel that the effect will be temporary.

The IDBI is also planning to offer investors an interest on the application amount. This is to make up for the ban imposed by the Sebi on "early bird" incentives.