The National Housing Bank (NHB)’s Capital Gains Bonds Issue 2002 opened for subscription in August 2002 has received overwhelming support from individuals, banks and institutions who have invested in the Bonds; in all, the aggregate amount of subscription received so far is over Rs.2,600.00 crore. Keeping in view the trends in the general interest rates in the economy besides the features of comparable instruments of other institutions, NHB has reviewed the existing structure of its Bonds. The Bond Issue stands suspended temporarily from the close of business hours on Saturday the 20th September 2003. The Issue will be re-opened for subscription from Friday the 26th September on private placement basis and will continue to be on tap. NHB is introducing additional features for the benefit of the intending investor-public.

NHB will now be offering choice of two different structures of its Capital Gains Bonds — one with a coupon of 5.10% per annum, having a tenor of 5 years with put and call option at the end of 3rd year; and the second one with interest rate of 5.25% p.a. having a tenor of 7 years with put and call option at the end of 5th year. Additionally, the investor can opt for receiving interest payment on the Bonds either annually on 1st April or cumulatively at the end of maturity period opted for. The yield on the cumulative interest payment in respect of 5.10% Bond will be 5.36 for 3 years and 5.65 for 5 years. In respect of the Bond with coupon of 5.25%, the yield will be 5.83 for 5 years and 6.15 for 7 years.

The Bonds are rated AAA to facilitate banks and financial institutions for secondary market operations after the mandatory lock-in period of 3 years. Since NHB’s Bonds are priority sector in nature, investment made by scheduled banks will be eligible for inclusion in their priority sector portfolio besides qualifying for housing finance allocation of 3% of the incremental deposits and 20% risk weight for the purpose of capital adequacy ratio. Banks will also be exempt from the 5% ceiling on investments in the Bonds of NHB.

NHB’s financials have consistently been strong. Highlights of the performance as on June 30, 2003:-

Total disbursement of refinance and project finance during the year Rs.2709.72 crore; total asset-portfolio Rs.10,289.66 crore; net non performing assets continues to be NIL while the net profit is Rs.120.74 crore. Outstanding borrowings Rs. 8,212.00 crore. NHB’s share capital of Rs.450.00 crore, entirely subscribed by the Reserve Bank; the net owned fund is Rs.1538.63 crore; and capital adequacy ratio is 27.96%.