The term-lending institution for, the first time, introduced a floating ratebond where the investor receives interest at a spread of 50 basis pointsabove the benchmark rate -- the weighted average yield on 364-day treasurybills. IDBI's floating rate flexibond offers 50 basis points over theweighted average yield on 364-day treasury bills.

The tenor of this instrument will be five years with a call and put optionafter three years.

"In case the interest rates head southwards after the announcement of thebudget, the term lending institution will not withdraw the issue and insteadit will not exercise the greenshoe option," IDBI chairman GP Gupta said. TheRs 300-crore Flexibonds 8 series carries a greenshoe option of Rs 300crore.

The Flexibonds-8 offers an annualised return of 11 per cent for a five-yearbond compared to the annualised return of 12.5 per cent offered inFlexibonds-7, which was open for subscription in July 1999. The issue willbe open from February 25 to March 10.

"IDBI had raised around Rs 1,500 crore through the earlier tranche floatedin July, 1999. However, on account of lesser repayments this year, and inanticipation of interest rates going southwards, we have limited the size ofthe current offering to only Rs 300 crore," Gupta said.

The Flexibonds-8 issue offers four instruments - regular income bond,growing interest bond, floating rate bond and infrastructure tax-savingbond.

"The regular income bond has a tenor of five years and will carry anannualised rate of 11 per cent, while the growing interest bond with abuilt-in step-up coupon will offer 9.75 per cent in the first year up to10.5 per cent in the fifth year. Meanwhile, the infrastructure tax-savingbond offers 10.25 per cent payable annually for three years and is eligiblefor tax concessions under section 54EA and section 88 of the Income-TaxAct," IDBI said.

The current round of bond offering is also available for subscription byNRIs, overseas corporate bodies and FIIs on repatriable basis. IDBI has sofar raised Rs 7,675 crore in the current fiscal, including flexibond-7 of Rs1,500 crore and omni bond tier-II of Rs 1,500 crore.

Meanwhile, IDBI has announced that it will shortly enter secondary marketoperations and guidelines to this effect werebeing framed. Its board hasalready approved the proposal. "We will stick to RBI guidelines to banks,which stipulate only five per cent of the incremental assets be deployed insecondary market operations," Gupta said. IDBI has a total asset size of Rs75,000 crore.