Your esteemed view on SBI Bond opens on 18-Oct-2010

POSTED BY Rajendran ON October 15, 2010 9:33 am COMMENTS (8)

Hi ,
  I got the below information. Your esteemed thought on this is highly appreciated.
Fantastic investment opportunity from our Country’s premier Bank – State Bank of India.
  • Public issue of Bonds for Rs.500 Crs. with option to retain oversubscription upto Rs.500 Crs, totalling Rs.1000 Crs.
  • Issue opens on 18/10/2010 & closes on 25/10/2010.
  • Allotment only on ” first come first serve” basis.
  • 9.50% interest for 15 years Bonds & 9.25% interest for 10 years Bonds.
  • NO TDS – whatever may be the interest amount.
  • No lock in period
  • Listing in NSE to ensure liquidity
  • Applications for upto Rs.5 lacs will be come under Retail category.
  • “AAA/Stable” rating by CRISIL & “CARE AAA” rating by CARE. 

I find the following very attractive:
1) 9.5% for 15 years….. currently FD interest rate is 7.5% only.
2) No Lock in Period and is going to listed in NSE for liquidity. In case if FD rates go up or some other better opportunity pops up we can switch over by selling these bonds.
3) No TDS.
4) SBI  is offering this… govt will back it no need to worry abt any risk.
Rajendran. N

8 replies on this article “Your esteemed view on SBI Bond opens on 18-Oct-2010”

  1. Rajendran says:

    At last ICICI DIRECT didn’t offer SBI Bonds via thier demat facility. I hope I will buy this from secondary market some time. Thanks.

  2. Rajendran says:

    @Saurabh. I have my demat account with ICICI so would be applying via that. Not sure about where to get the forms in Delhi. Thanks.

  3. Rajendran says:

    1 more doubt on these bonds. Since the bond is going to be listed in NSE, what will happen if I sell the bonds after 1 year i.e. say I am selling the bond after 1 year and 11 months. In this case I would be holding the bonds for more than 1 year so the returns it generate should be tax free right (i.e. the interest for the 11 months of 2nd year should be tax free). Experts please clarify. Thanks.

  4. Rajendran says:

    @Saurabh. I just saw the statement about TDS on interest above 2500 in SBI prospectus. I have a question on this: since the bond is going to get listed in NSE what if I sell the bond say couple of week/days before the interest payout? Will buyer bear the TDS amount?

    @Ajay I am not going to invest in this and not gonna wait till 10./15 years to get back the money instead I am planning to invest in this till the market valuation comes to more realistic value (say around < 20 PE) then would switch over to equity. Currently my surplus money is lying in the FD account which is earning only 7.5% on 990 day deposit.

    No one is going to increase the FD rate by 200 bps over night. If it happens it would be gradual.

    @Kiran. Well said. What your are saying is technically correct though but think practically you will agree to what I had said.

    1. saurabh_kdsunita says:

      Hi Mr.Rajendran , I am also in doubt regarding this , do u have any idea from where the application forms can we get in Delhi ? Thanks in advance.

  5. saurabh_kdsunita says:

    Mr.Rajendran , please check in sbi website , from where prospectus can be downloaded , it is clearly mentioned that tds is applicable if interest exceed Rs.2500 , subject to same conditions as in normal fixed deposit in banks.

  6. Kiran Srirama says:

    Re: 4)

    It’s a wrong notion that many mis-understand. Although investing in Public banks is less riskier compared to Private banks, Government DOES NOT guarantee anything.

    If you are looking for a 15yr term, PPF is probably better than these bonds in terms of yield, remember PPF comes under EEE.

  7. Ajay says:

    My understanding is that Bond value goes down when the interest rates go up. So if FD rates go up then these bonds may yield less. What do you think ?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.