SBI launches Series 3 lower Tier II bonds of face value of Rs 10,000 each and series 4 lower Tier II bonds of face value of Rs 10,000 each aggregating to Rs 1,000 crore, with an option to retain over-subscription upto Rs 1,000 crore for issuance of additional bonds aggregating to a total of upto Rs 2,000 crore.
Returns are 9.75% per annum on series 3 lower Tier II bonds and 9.95% in case of series 4 lower Tier II bonds. Non retail applicants will get 9.3% and 9.45%, respectively.
Eligibility
Must have a demat account
Minimum Investment: Rs.10000/-
Maximum Investment: Rs. 500000/-
Who can Invest
Resident Indian individuals, Hindu Undivided Family, partnership firms, corporates, banks, financial institutions, insurance companies, mutual funds, provident/superannuation/ gratuity/ pension fund, private/public religious / charitable trust, co-operative society can invest in these bonds.
FIIs, NRIs and OCBs are not permitted to apply in this Tranche 1 Issue
AllotmentAllocation for the Series Bonds shall be made on a first come first served basis based on the date of Application
Call Option
SBI has the option to redeem 10 year bond after 5 years and 15 year bond after 10 years
Pros
- Good interest rate being offered for very long duration. Banks are offering upto 10.5% interest rate but for much shorter duration, meaning you might not get the same interest rate at the time of renewal of fixed deposit
- Guarantee from biggest financial house of India having govt backing
- Bonds will be traded in stock exchange which would mean high liquidity
- If at all interest rates fall, then these bonds can be traded at premium at stock exchange ensuring capital appreciation
- Good returns for long durations
Cons
- No tax benefit under section 80CCF or on interest earned although its not available on any instrument like this.
- The Bonds are not deposits of the Bank and are not guaranteed or insured by the Bank or any party related to the Bank and they may not be used as collateral for any loan made by the Bank or any of its subsidiaries or affiliates. Bonds are different from fixed deposits and are not covered by deposit insurance.
- Cannot be purchased online.
SBI Retail Bonds at a glance
Issuing Bank | State Bank of India |
Issue | Public Issue of the Bonds aggregating to Rs. 5,000 million with an option to retain over subscription upto Rs. 5,000 million, aggregating to Rs. 10,000 million. The Bank intends to deploy the Issue proceeds to augment its capital base in line with its growth strategy. |
Stock Exchange proposed for listing of the Bonds | NSE |
Issuance and Trading | Compulsorily in dematerialized form |
Market Lot/Trading Lot | One Bond |
Depositories | NSDL and CDSL |
Security | Unsecured |
Rating | The Bonds proposed to be rated under this Issue have been rated by CARE for an amount of upto Rs. 10,000 million and by CRISIL for an amount of upto Rs. 10,000 million |
Issue Schedule | open date for Tranche 1 is February 21, 2011 and close date is February 28 2011 |
Returns | 10 Years 9.75% and 15 Years 9.95% |
Frequency of Interest payment | Annual in both the options |
Step Up Coupon | If the Bank fails to exercise the call option, the Series 1 Lower Tier II Bonds or Series 2 Lower Tier II bonds will accrue interest at a higher rate, being the Coupon rate plus 0.50%. The step up option will be exercised only once during the whole life of the instrument. |
Lock-in Clause for interest payments/principal payment | No lockin |
Redemption Date | 10/15 years |
Minimum Investment | Rs 10000/- |
