In tune with the downward movement of interest rates, the Mumbai-based institution has cut the coupon on the various instruments on offer by 70-250 basis points. For example, the Regular Income Bond offers 10.65 per cent per annum payable monthly as compared with 11.35 per cent earlier. However, in the annual interest option, the coupon has been pared by 85 basis points to 11.25 per cent.

Similarly, in the Tax-Saving bond with Section 88 benefit (or 20 per cent tax reduction), the rate has been slashed by 100 basis points - from 12 per cent to 11 per cent. Even the option with capital gains tax exemption, the coupon has been brough down to 11 per cent. However, it is the Encash Bond, which has been a major victim.

A withdrawal after the first year will get an interest of only 10 per cent against 10.5 per cent earlier. After the third year, however, the interest is only 11.1 per cent compared with as much as 13.5per cent earlier. The sharp cut in the long-end say a lot about the expected long-term interest rate movement.

On January 14, the government had annuounced a 100 basis point cut in the PPF rate from 12 per cent to 11 per cent. A similar cut was also effected in the case of the National Savings Scheme (NSS). Anticipating a cut in the rates, banks and post-offices had stopped accepting deposits. ICICI, whose issue was open at that time, withdrew the prospectus and stated that a new document would be brought out keeping in mind the trend in interest rates.

The issue is now slated to open on February 7 and close on February 24. The issue proposes to mop up Rs 300 crore plus an oversubscription of another Rs 300 crore.

Interestingly, UTI MIP, which closed for subscription on January 31, had also lowered the coupon to 10.25 from 10.5 per cent earlier. While the response is slated to be relatively lukewarm compared with the earlier issues, the fact that the interest is tax-free, still makes it an attractive investment bet. ICICI's regular return at 10.65 per cent plus tax, is less likely to attract investors than last time.