IIB is a product that offers retail investors relief from inflation. The maturity period of IIB is 10 years and its interest is linked to the Consumer Price Index (CPI). It is attractive because it offers a fixed rate of 1.5% per year and a retail inflation-based variable rate. Interest is to be compounded half-yearly and paid at maturity.
Khans comments come even as the RBI had in December extended the date for issuance of IIBs from the earlier date of December 31 to March 31, 2014, owing to lukewarm response.
The issuance of the bonds was announced on November 29 by the RBI in consultation with the government.
It (IIB) is a good product as it stands now. We expect the demand to pick up. But we are in discussion with the government, so some clarification will come. On existing features, some clarifications have been sought. However, there will be no change immediately, Khan told reporters on the sidelines of a National Housing Bank event.
We will come up with something. We had a meeting with bank chairmen this morning in Mumbai. All of them have committed. Issues of marketing, availability of forms, awareness campaign -- all these things are happening and bank chairmen have committed to take it forward, he added.
The yearly investment limit in the product ranges from a minimum of Rs 5,000 to a maximum of R5 lakh per applicant. Besides charitable institutions, the other eligible subscribers include individuals, universities and Hindu Undivided Family.
RBI, which acts as the central depository issues and holds the securities in the form of Bonds Ledger Account. IIBs distribution and sale is done through all public sector banks including SBI and its associate banks. Besides, investors can also approach private sector lenders such as ICICI Bank, HDFC Bank and Axis Bank, as well as the Stock Holding Corporation of India.
Debt-switch plan may be put off
RBI deputy governor HR Khan on Thursday said the R50,000- crore debt-switch programme is unlikely to happen this fiscal and may be postponed to the next financial year.
He said the debt-switch, when done, will be done in a non-disruptive manner, adding that if there are problems, we may not do it (in fourth quarter of 2013-14 fiscal). But, it is very much on cards.
Discussions are going on. It (debt switch not happening this year) is one possibility. There is probability that we may not do it. But who said we will not totally do it. This is one of the possibility that it may not happen this year but we are working on it, he told reporters on the sidelines of a National Housing Bank event. Khan also did not rule out the option of a private placement.
The debt-switch programme was announced by the government in the Budget 2013-14 wherein the plan is to buy shorter tenor bonds and sell long-term debt to market participants with an aim to spread out redemptions of debt to future years.
Incidentally, the RBI Governor Raghuram Rajan had also recently stated that debt switches when done will be carried out in a non-disruptive manner. According to RBI data, R1.87 lakh crore worth of bonds are due for redemptions in 2014-15, which further increases to around R2 lakh crore in 2015-16 and more than R2.25 lakh crore in 2016-17.