NHB slashes coupon rate on the Capital Gains Bonds

The National Housing Bank (NHB) had received overwhelming support to its 7.15% Capital Gains Bonds 2002 Issue from the investors-both individuals and institutions. Within a span of less than 3 months from the launch of Issue on August 14, 2002, an aggregate amount of about Rs.700.00 crore was mobilised.

Consequent on the recent reduction in the  Bank Rate  and  Cash Reserve Ratio  by the Reserve Bank of India, as announced in its mid-term Monetary and Credit Policy Review which signaled continuance of softer interest rate regime, the NHB has also reviewed the coupon on its Capital Gains Bonds. NHB has since decided to suspend its on-going Capital Gains Bonds Issue for a short period– 7th November to 10th November 2002, re-open the Issue on 11th November 2002, at the revised coupon rate of 6.50% per annum payable annually.   The Issue will be on tap and on private placement basis as hitherto. The other terms of the offer,  such as,   redemption period of 7 years with put and call option at the end of  the 3rd year  and interest payment annually on 1st April  shall,  however, remain un-changed.

The NHB’s Capital Gains Bonds carries the benefit of Section 193 (ii b) of the Income-tax Act 1961 in terms of which no Income-tax will be deducted at source on the interest. The investors will be required to assess for themselves the tax on their income from all sources.

The NHB’ Capital Gains Bonds are long term specified assets within the meaning of explanation (b) to sub-section (3)  of Section 54-EC of the Income Tax Act, 1961.   The capital gains arising from out of transfer of long term capital assets on or after 1st April  2002, can be invested in the NHB’ bonds within a period of six months from the date of transfer of the assets to be eligible for exemption thereunder. The minimum amount of subscription is Rs.10,000/- and further amounts in  multiples thereof. The Bonds will be on tap and NHB reserves the right to suspend/close the Issue at any time. The Bond is not transferable; non-negotiable and cannot be offered as security for availing loan or advance.

Since the Bonds issued by NHB 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.

The cumulative amount of refinance disbursed by NHB as on June 30, 2002 was Rs.7251.00 crore. During 2002-03, a further amount of Rs.1375.00 crore is expected to be disbursed. NHB’s capital base is Rs.350.00 crore contributed entirely by the RBI and the Reserves were at  Rs.766.15 crore. The net owned fund of the NHB is Rs.1116.15 crore. The position of net-non performing assets (NPA) was ‘nil’. NHB’s gross profit for the year 2001-02 was Rs.158.21 crore. All the pending disputes relating to its 1992-investment transactions with other institutions have since been settled through the orders of the Hon’ble Supreme Court.

November 06, 2002