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NHB slashes coupon rate on the Capital Gains Bonds

NHB slashes coupon rate on the Capital Gains Bonds : January 04, 2003
NHB slashes coupon rate on the Capital Gains Bonds

In the light of the prevailing trends in the interest rates and continued comfortable liquidity position in the market, the National Housing Bank (NHB) has reviewed the coupon rate on its on-going capital gains bonds and decided to suspend the receipt of subscription temporarily, from Monday the 6th January to 14th January 2003.

2. The Bond Issue will, however, be re-opened for subscription, at a coupon rate of 6.0% per annum (from the earlier rate of 6.50%), from Wednesday the 15th January 2003 and will be on tap until further notice. The Issue will continue to be on private placement basis. The other terms of the Issue, 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.

3. The NHB had initially opened the capital gains bond Issue on August 14, 2002 with a coupon rate of 7.15% p.a. and subsequently revised the rate to 6.50% p.a. from 11th November 2002. The Bond Issue under both the coupon rates had received an over whelming support from the investors—individuals and institutions, with their subscription money aggregating about Rupees one thousand crore.

4. The Central Board of Direct Taxes have extended the benefit of Section 193 (ii b) of the Income-tax Act 1961 to the investment in NHB’s Bonds, in terms of which no Income-tax will be deducted at source on the interest.

5. 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 Asset to become eligible for exemption there-under. The minimum amount of subscription is Rs.10,000/- and in multiples thereof. The Issue of 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.

6. 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.

[B. Hanumantha Rao]