Christened as Gilt Rate Plus, the bond is designed to provide returns linked to yields on government of India securities. In fact, the interest rate on these bonds are linked to the average semi-annualised yield on gilts with a residual maturity of one year.

A closer look reveals that the Gilt Rate Plus bond is actually old wine in a new bottle. Akin to the floating rate bonds (normally benchmarked to the SBI three-year deposit rate), ICICI Gilt Rate Plus, too, carries a floating rate of interest payable annually. Where the latter differs from the former is in its first interest payment -- which is fixed at 11 per cent per annum. In the subsequent years (i.e., the next four years), the interest rate will be 0.75 per cent over and above the yields on gilts which have a residual maturity of one year. However, while there is no floor, the ceiling has been fixed at 12.60 per cent.

This means you stand to lose money when the interest rates fall, but no gain accrues when the rates are northward bound -- a heads-you-win, tails-I-lose type of scenario. At present, the yield on a 1-year government paper varies between 10-10.5 per cent, which means if the prevailing interest rate regime continues until February 2001, you can hope to earn between 10.75-11.25 per annum. There is a maturity bonus (akin to the post-office MIS) of 5 per cent of the face value of the bond (i.e., Rs 250); but mind you, this will attract TDS. The bonus, obviously, is not available if the bond is not held till its maturity.

Liquidity is a major advantage of the Gilt Rate Plus bond. Bondholders have the option of early redemption on January 31 each year. In case the option is exercised, ICICI will simply repay the face value of the bond along with the last interest due. The tenure of the bond is five years and the minimum application is Rs 5000. This means, if you invest Rs 10,000 in two Gilt Rate Plus bonds, in the first year you will get Rs 1100 as interest. Thereafter, the interest will depend on the benchmark rate (plus 0.75 per cent) and on redemption you earn a maturity bonus of Rs 500 in addition to the interest.

While ICICI has retained its usual fare of bonds this time around, the coupon has been pared marginally. In its regular return bond (the bread-and-butter instrument of the issue), the annual interest has been lowered to 12.10 per cent compared with 12.25 per cent earlier. Similarly, in the monthly option, the coupon is 11.35 per cent as against 11.50 per cent in the last issue. It now makes even more sense to log into UTI's Monthly Income Plan which offers a tax-free 10.5 per cent per annum payable monthly.

The encash-bond, tax-saving bond and even the money mutliplier bond feature in ICICI's Safety Bonds' November tranche. Apart from the tax-saving bonds with benefits under Section 88 and Section 54 EA and EB, the others can be given a miss.