Announcing the the launch of its public bonds issue, the institution's chairman & managing director GP Gupta said that since the inflation has fallen below 2 per cent there is case of softening of interest rate.

"While in the short run it will stay stable, the long term rate will soften," Gupta said.

Gupta said flexibonds series 99-b with four instruments will be opened for subscription on July 27 till August 19. The size of the issue is Rs 750 crore with an option to retain oversubscription upto Rs 750 crore.

The four instruments satisfying the varying needs of the investor are regular income bond, growing interest bond, deep discount bond, retirement bond.

The regular bond offers a return of 12.5 per cent annualised for period of five years. The investor hasthe option to receive interest payments either monthly, half-yearly or annually.

The growing interest bond has a built-in step-up in the interest rates rising every year from 10.75 per cent in the first year to 14.75 per cent in the fifth year. The investor earns higher returns in each subsequent year if he holds the bonds. In case the investor needs funds urgently he can encash the bond any time after one year from the deemed date of alloment.

IDBI deep discount bond is an instrument, issued at a discount price, having five years, 10 years and 15 years maturity options. Investment of Rs 5,000 (issue price) becomes Rs 9,000 (face value) at the end of five years, Rs 16,300 (face value) at the end of 10 years and Rs 29,500 (face value) at the end of 15 years.

The IDBI retirement bond is an instrument specially designed for investors retiring in next 3-5 years. It is a convenient tax planning avenue. The maturity of the bond varies from nine years to 14 years. The investment of Rs 5,000 after a wait periodof three years, investors will get an annuity of Rs 1,400 for six years and the last annuity of Rs 1,500 on maturity, that is at the end of the sixth year from the end of the wait period. Under option `B', the investor will get 50 per cent of the principal amount after await period of five years and five annuities of Rs 1,850 per bond from the end of sixth year. Those who chose option `C', will, on an investment of Rs 5,000 get 10 equal annuities of Rs 1,500 starting from the end of wait period of five years. The yield to maturity on retirement bond will range from 12.52 per cent per annum to 12.98 per cent per annum depending upon the option chosen.

There is no limit for maximum investment. The minimum amount of investment has been kept at Rs 10,000 (two bonds) in the case of all instruments except IDBI retirement bond where the minimum investment is Rs 20,000 (four bonds). There is no call option retained by IDBI for premature redemption in the cases of regular income bond, growing interest bond andretirement bond.