RBI pushes Relief Bonds to Investors
Aug 02, 2000

Author: PersonalFN Content & Research Team

In a move to decentralize and facilitate prospective investors to invest in tax free `9% Relief Bonds', re-launched by the Government of India in the fiscal 1999, the Reserve Bank of India (RBI) has authorised branches of four private sector banks and Stock Holding Corporation of India (SHCIL) to receive subscriptions for the 9% Relief Bonds with effect from August 1, 2000.

To encourage tax-free saving, the government of India launched Relief Bonds in the fiscal 1993. The bonds were further re-launched in the fiscal 1995 and 1999. In the last two- years, the Relief Bonds have not drawn much attention from the retail investors' inspite of offering a fixed rate of 9% irrespective of the ruling interest rate regime.

One reason why these bonds have received a luke warm response from investors over the years is the non accessibility of these bonds and lack of the awareness about the product. Thus to promote investments in these bonds, RBI has authorised four private sector banks-- HDFC Bank, ICICI Bank, UTI Bank and IDBI Bank to receive subscription to the relief bonds.

Now 93 branches of these agencies will also be able to receive subscription, issue and service 9% Relief Bonds along with select branches of public sector banks that are already authorised to issue and service the relief bonds.

The number of bank branches accepting and servicing Relief Bonds has today increased to 850 giving the investing public a much wider choice. Apart from these branches, 15 Reserve Bank offices also accept and service Relief Bonds.

The designated agency branches offer Relief Bonds in dematerialised form. The branches issue these bonds in the form of a bond ledger account opened in the name of investor. The Bonds held in the form of a bond ledger account with a bank not only protect the investor from theft or loss of bond certificates but also facilitate payment of half-yearly interest and repayment at the branch itself.

The Relief Bonds are a preferred investment avenue with investing public, as the interest earned on these bonds is totally free from Income Tax. These bonds also offer wealth tax exemption. The Bonds also offer nomination facility, easy transferability and are accepted as security against loans. Having five-year maturity period, the minimum investment in 9% Relief Bonds is Rs1, 000 and its multiples with no upper limit on investments. Non-Resident Indians are eligible to invest in these bonds subject to exchange control regulations. The interest on these bonds is payable half-yearly with cumulative and non-cumulative options. The interest is paid on these bonds even after maturity if not redeemed.