RBI asks banks to mark down valuation of special bonds
23 May 2008
The Reserve Bank of India has asked banks to value special bonds issued by the central government to various state-run firms at a lower yield spread of 25 basis points over the corresponding GoI bonds.
The special bonds issued to public sector companies, including oil marketing firms, by the Government of India do not qualify for bank reserve norm status.
The new valuation norm will come into effect from the beginning of the the current financial year, ie, 1 April.
Currently, such securities enjoy a mark-up of 50 basis points over the corresponding central government paper.
Oil bonds and fertiliser bonds as also bonds issued to the State Bank of India, the Unit Trust of India, Industrial Financial Corporation of India Ltd, Food Corporation of India, Industrial Investment Bank of India Ltd, the former Industrial Development Bank of India and the Shipping Development Finance Corporation will fall under this category, an RBI release said.
These special bonds are issued by the central government to compensate state-run firms for losses from selling their products at prices below benchmarks.
Currently, such securities enjoy a mark-up of 50 basis points over the corresponding federal government security.
