Govt may not continue with zero-coupon bond route

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Govt may not continue with zero-coupon bond route


NEW DELHI: The government is unlikely to take zero-coupon bond route to further recapitalise public sector banks after the Reserve Bank expressed some concerns in this regard, sources said.

The government, they said, would resort back to recapitalisation bonds bearing a coupon rate for capital infusion in these banks. To save interest burden and ease the fiscal pressure, the government last year decided to issue zero-coupon bonds for meeting the capital needs of the banks. The first test case of the new mechanism was a capital infusion of ₹5,500 crore into Punjab and Sind Bank by issuing zero-coupon bonds of six different maturities last year.

These special securities with tenure of 10-15 years are non-interest bearing and valued at par.

These special securities with tenure of 10-15 years are non-interest bearing and valued at par.



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