Mutual funds

Mutual Fund is a trust that pools savings of number of investors having common financial

goals for investing in a particular manner by professional managers. It makes it possible

for investors to assume risks in the expectation of higher return

Advantages of Investing in Mutual Funds

Regulated: Mutual Funds are regulated by SEBI, to safeguard the investor's interest.

Tax Benefits: No long term Capital Gain Tax – if units held for more than 1 year. Taxfree dividends.

Liquidity: Most open-ended funds redeem within 3 working days at the current NAV.

Convenience: Easy to invest and easy to redeem.

Risk Diversification: Diversified portfolio leads to risk control, investments across various industries & stocks.

Flexibility: Offers features like systematic investment plan, systematic transfer plan & systematic withdrawal plan. Most funds allow switching between funds, e.g. from debt to equity etc.

Transparency: Declaration of NAV daily and disclosure of portfolio on regular basis.

Professional Management: Funds are managed by proficient fund managers

There exists a need for a regular investment habit, throughout the various life stages of an Investor… So start now

Why should One invest In Mutual Fund through IDBI Bank ?

We meet your need:

We believe every individual has specific needs and priorities. Your needs could vary from buying a house, providing for your child’s education, getting your child married, and so on. All your needs are very important for us. We can help in fulfilling your dreams by assisting you to select the schemes, which would be in consonance with your needs.

We work towards building an Investment culture:

It would be our constant endeavour to inculcate saving and organised investing habit in you. We will help you plan your investments and build a healthy mutual fund portfolio, which would be an optimal solution for your needs. Cultivating an investment culture will not only help you but also your family.

We can be your ‘One Stop Financial Solution’:

Apart from subscribing to mutual fund schemes through us, you can also take advantage of our banking services and whole range of financial products, like Saving and Current a/c, ATM card, personal loan product, depository services, loan against units \ shares etc. and see your financial needs satisfied under one roof

We recommend what is best for you ‘Equity Funds’:

Equity funds which mainly consist of stock investments are the most common type of mutual funds. There are various recommended equity schemes in our bouquet of funds. The selection of these funds is based on combination of qualitative and quantitative evaluation of the Indian Mutual Fund universe by a reputed research agency. The selection is reviewed and revised every month. Our team of Relationship Managers provides research based guidance, as per your individual risk profile and requirements. We help you plan for your retirement, preserve your legacy and manage your present and future wealth.

Our key focus plans are as follows:

SIP - Systematic Investment Plan:

The Systematic Investment Plan (SIP) is a simple and time honored investment strategy for accumulation of wealth in a disciplined manner over long term period. The plan aims at a better future for its investors as an SIP investor gets good rate of returns compared to a one time investor. SIP ensures averaging of rupee cost as consistent investment ensures that average cost per unit fits in the lower range of average market price.

With SIP one can start investing as soon as the earning is started. Investing a portion of the income one can meet the greater expenses of life at a later stage.

Investing through SIP works with greater power of compounding with significant impact on wealth accumulation.

Investment through SIP minimizes the effects of volatility of market over the return.

ELSS- Equity Linked Saving Schemes:

Equity funds which mainly consist of stock investments are the most common type of mutual funds. There are various recommended equity schemes in our bouquet of funds. The selection of these funds is based on combination of qualitative and quantitative evaluation of the Indian Mutual Fund universe by a reputed research agency. The selection is reviewed and revised every month. Our team of Relationship Managers provides research based guidance, as per your individual risk profile and requirements. We help you plan for your retirement, preserve your legacy and manage your present and future wealth.

Main advantage of ELSS is its short lock-in period of only 3 years.:-

Since it is an equity linked scheme earning potential is very high. It gives the investor the option of saving tax while participating in the growth of the capital market.

Investor can opt for dividend option and get some gains during the lock-in period Investor can opt for Systematic Investment Plan in ELSS Some ELSS schemes also offer personal accident death cover insurance Fulfilling one’s dream is very often just a Question of… Translating dreams into financial goals Setting realistic time frames for each of them Evolving an investment strategy to achieve them Please get in touch with our Relationship Manager at the branch nearest to you for

more details.

IDBI Bank offers non - discretionary investment advisory services and the decision for investing would be at the sole risk and responsibility of the customer. Risk factor:

Mutual funds and securities investments are subject to market risk & there is no assurance or guarantee that the objective of the schemes will be achieved. Please refer to the offer document for scheme specific risk factors before investing. This document does not purport to be an advice to purchase mutual fund units.

Life Insurance

Life insurance is a contract between an insured (insurance policy holder) and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses (such as funeral expenses) are also sometimes included in the benefits.

Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot and civil commotion.

Kinds of Life Insurance Policies:

Term Insurance

You can choose to have protection for a set period of

time with Term Insurance. In the event of death or Total and Permanent Disability if the benefit is offered), your dependants will be paid a benefit. In term Insurance, no benefit is normally payable if the life assured survives the term.

Whole Life Insurance

With whole life insurance, you are guaranteed lifelong protection. Whole life insurance pays out a death benefit so you can be assured that your family is protected against financial loss that can happen after your death. It is also an ideal way of creating an estate for your heirs as an inheritance.

Endowment Policy

An Endowment Policy is a savings linked insurance policy with a specific maturity date. Should an unfortunate event by way of death or disability occur to you during the period, the Sum Assured will be paid to your beneficiaries. On your surviving the term, the maturity proceeds on the policy become payable.

Money back plans or cash back plans:

Under this plan, certain percent of the sum assured is returned to the insured person periodically as survival benefit. On the expiry of the term, the balance amount is paid as maturity value. The life risk may be covered for the full sum assured during the term of the policy irrespective of the survival benefits paid.

Children Policies

These types of policies are taken on the life of the parent/children for the benefit of the child. By such policy the parent can plan to get funds when the child attains various stages in life. Some insurers offer waiver of premiums in case of unfortunate death of the parent/proposer during the term of the policy.

Annuity (Pension) Plans

When an employee retires he no longer gets his salary while his need for a regular income continues. Retirement benefits like Provident Fund and gratuity are paid in lump sum which are often spent too quickly or not invested prudently with the result that the employee finds himself without regular income in his post - retirement days. Pension is therefore an ideal method of retirement provision because the benefit is in the form of regular income. It is wise to provide for old age, when we have regular income during our earning period to take care of rainy days. Financial independence during old age is a must for everybody.

General Insurance

What is General Insurance? Insurance other than ‘Life Insurance’ falls under the category of General Insurance. General Insurance comprises of insurance of property against fire, burglary etc, personal insurance such as Accident and Health Insurance, and liability insurance which covers legal liabilities. There are also other covers such as Errors and Omissions insurance for professionals, credit insurance etc. Non-life insurance companies have products that cover property against Fire and allied perils, flood storm and inundation, earthquake and so on. There are products that cover property against burglary, theft etc. The non-life companies also offer policies covering machinery against breakdown,there are  policies that cover the hull of ships and so on. A Marine Cargo policy  covers goods in transit including by sea, air and road. Further, insurance of motor vehicles against damages and theft forms a major chunk of non-life insurance business. In respect of insurance of property, it is important that the cover is taken for the actual value of the property to avoid being imposed a penalty should there be a claim. Where a property is undervalued for the purposes of insurance, the insured will have to bear a rateable proportion of the loss. For instance if the value of a property is Rs.100 and it is insured for Rs.50/-, in the event of a loss to the extent of say Rs.50/-, the maximum claim amount payable would be Rs.25/- ( 50% of the loss being borne by the insured for underinsuring the property by 50% ). This concept is quite often not understood by most insureds. Personal insurance covers include policies for Accident, Health etc. Products offering Personal Accident cover are benefit policies. Health insurance covers offered by non-life

insurers are mainly hospitalization covers either on reimbursement or cashless basis. The cashless service is offered through Third Party Administrators who have arrangements with various service providers, i.e., hospitals. The Third Party Administrators also provide service for reimbursement claims. Sometimes the insurers themselves process reimbursement claims. Accident and health insurance policies are available for individuals as well as groups. A group could be a group of employees of an organization or holders of credit cards or deposit holders in a bank etc. Normally when a group is covered, insurers offer group discounts. Liability insurance covers such as Motor Third Party Liability Insurance, Workmen’s Compensation Policy etc offer cover against legal liabilities that may arise under the respective statutes— Motor Vehicles Act, The Workmen’s Compensation Act etc. Some of the covers such as the foregoing (Motor Third Party and Workmen’s Compensationpolicy )  are compulsory by statute. Liability Insurance not compulsory by statute is also gaining popularity these days. Many industries insure against Public liability. There are liability covers available for Products as well. There are general insurance products that are in the nature of package policies offering a combination of the covers mentioned above. For instance, there are package policies available for householders, shop keepers and also for professionals such as doctors, chartered accountants etc. Apart from offering standard covers, insurers also offer customized or tailor-made ones. Suitable general Insurance covers are necessary for every family. It is important to protect one’s property, which one might have acquired from one’s hard earned income. A loss or damage to one’s property can leave one shattered. Losses created by catastrophes such as the tsunami, earthquakes, cyclones etc have left many homeless and penniless. Such losses can be devastating but insurance could help mitigate them. Property can be covered, so also the people against Personal Accident. A Health Insurance policy can provide financial relief to a person undergoing medical treatment whether due to a disease or an injury. Industries also need to protect themselves by obtaining insurance covers to protect their building, machinery, stocks etc. They need to cover their liabilities as well. Financiers insist on insurance. So, most industries or businesses that are financed by banks and other institutions do obtain covers. But are they obtaining the right covers? And are they insuring adequately are questions that need to be given some thought. Also organizations or industries that are self-financed should ensure that they are protected by insurance. Most general insurance covers are annual contracts. However, there are few products that are long-term. It is important for proposers to read and understand the terms and conditions of a policy before they enter into an insurance contract. The proposal form needs to be filled in completely and correctly by a proposer to ensure that the cover is adequate and the right one.

Face Value : Rs. 10000/- per Bond

Minimum Application : One bond of Rs.10000/-

Maximum Application : 500 Bonds of Rs.10000/-

Mode of subscription : 100% on application

Date of Allotment : At the last day of every month

Coupon Rate : 6% per annum

Maturity : 3 years from Deemed Date of Allotment

Transfer : Non-Transferable.

The application forms can be downloaded from the website: http://rec.rcmcdelhi.com

All IDBI at CMS enabled locations are authorised to collect the application.

Types of General Insurance:-

1. Automobile Insurance

Auto Insurance in India deals with the insurance covers for the loss or damage caused to the automobile or its parts due to natural and man-made calamities. It provides accident cover for individual owners of the vehicle while driving and also for passengers and third party legal liability. There are certain general insurance companies who also offer online insurance service for the vehicle.

Auto Insurance in India is a compulsory requirement for all new vehicles used whether for commercial or personal use. The insurance companies have tie-ups with leading automobile manufacturers. They offer their customers instant auto quotes. Auto premium is determined by a number of factors and the amount of premium increases with the rise in the price of the vehicle. The claims of the Auto Insurance in India can be accidental, theft claims or third party claims. Certain documents are required for claiming Auto Insurance in India, like duly signed claim form, RC copy of the vehicle, Driving license copy, FIR copy, Original estimate and policy copy.

There are different types of Auto Insurance in India :

Private Car Insurance – In the Auto Insurance in India, Private Car Insurance is the fastest growing sector as it is compulsory for all the new cars. The amount of premium depends on the make and value of the car, state where the car is registered and the year of manufacture.

Two Wheeler Insurance – The Two Wheeler Insurance under the Auto Insurance in India covers accidental insurance for the drivers of the vehicle. The amount of premium depends on the current showroom price multiplied by the depreciation rate fixed by the Tariff Advisory Committee at the time of the beginning of policy period.

Commercial Vehicle Insurance – Commercial Vehicle Insurance under the Auto Insurance in India provides cover for all the vehicles which are not used for personal purposes, like the Trucks and HMVs. The amount of premium depends on the showroom price of the vehicle at the commencement of the insurance period, make of the vehicle and the place of registration of the vehicle. The auto insurance generally includes:

Loss or damage by accident, fire, lightning, self ignition, external explosion, burglary, housebreaking or theft, malicious act.

Liability for third party injury/death, third party property and liability to paid driver

On payment of appropriate additional premium, loss/damage to electrical/electronic accessories

The auto insurance does not include:

Consequential loss, depreciation, mechanical and electrical breakdown, failure or breakage

When vehicle is used outside the geographical area

War or nuclear perils and drunken driving.

2. Travel Elite :-

Travel Elite an online travel insurance the provides the discerning traveler an array of policies to choose from, with each policy customized to meet your specific needs. Depending upon whether one is a student, businessman, corporate executive, senior citizen or one traveling with the family, one can choose.

Covers expenses of hospitalization, loss of baggage and other incidental expenses

Covers you against trip cancellation, trip curtailment and burglary of your home*

Quick disbursement of claims

Global expertise matched with local knowledge

Innovative packages to match individual needs

Only insurance company with in-house international toll-free numbers and fax numbers

Travel companion :-

Common travel problems like flight delays, travel injuries and illnesses, and lost or stolen baggage are why we recommend

you travel with the Travel Companion plan. The Travel Companion Plan offers insurance designed just for travelers. It can provide help with many of the things that can go wrong before, during and after your trip. If you have already purchased your Travel Companion Plan, please reference your full Description of Coverage. If you’re still wondering what the Travel

Companion Plan can do for you

You have to cancel your trip due to an unexpected event, such as an unexpected illness in the family or the financial default of your airline, cruise line or tour operator.

You have to return home early due to an emergency such as an unexpected illness or death in the family.

Your luggage is lost or delayed, forcing you to purchase necessary essentials or prescription medications.

Your luggage or personal effects are damaged or stolen. You become ill or injured and learn that your health care plan doesn’t cover you

outside the U.S. You need an emergency medical evacuation due to an accident or sudden illness. You run into flight delays and miss a portion of your trip or cruise. Your passport, travel documents or money were lost or stolen. You missed your connection due to weather. You need assistance with replacing a prescription or need an emergency cash

transfer.

Individual Health Guard

A type of insurance coverage that pays for medical and surgical expenses that are incurred by the insured. Health insurance can either reimburse the insured for expenses incurred from illness or injury or pay the care provider directly. Health insurance is often included in employer benefit packages as a means of enticing quality employees.

The cost of health insurance premiums is deductible to the payer, and benefits received are tax-free. Health insurance has many cousins, such as disability insurance, critical (catastophic) illness insurance and long-term care (LTC) insurance.

Family Floater Health guard

Floater implies single Sum Insured for entire family residing in India. Family includes Self, Spouse, Children, Parents and Parents in laws.

Available in two plans Silver and Gold.

Now you can buy and renew policies Online. Buy a new Family Health Insurance plan or Renew an existing Oriental Insurance Happy Family Floater Health Insurance policy by registering yourself on our Portal and paying online through your debit card / credit card or Net-banking. To check out various online facilities available, you may login on the Portal.

Salient features of the policy

• A floater providing Health Care solution to the proposer and his / her family under b one sum insured under one policy.

• The sum insured floats over all the beneficiaries under the policy.

• No medical examination for persons upto the age of 60 years.

• Pre-existing conditions cover after four consecutive renewals with the Company.

• Coverage under two options - SILVER and GOLD Covers.

• SILVER offers sum insured slabs of 1 to 5 lacs

• SILVER is subject to 10% Co-pay

• GOLD offers sum insured slabs of 6 to 10 lacs.

• This Health Care Policy covers the hospitalization expenses for the covered diseases / accident upto specific limits.

• GOLD plan offers as an inbuilt cover daily cash allowance and attendant allowance upto limits specified.

• Personal Accident cover is offered as add on cover under both the covers. In addition GOLD cover offers add on cover of life hardship survival benefit.

• Discount in OMP premium when Happy family floater Health Insurance policy is taken.

• Option of TPA and non TPA services.

• Discount in premium if TPA services not opted.

GOLD Investments

Why invest in gold?

Gold, the most precious metal of all, is also a popular form of investment. The savings come handy, for instance, during your daughter’s wedding. Investors can make the most out of its appreciating value potential without going through the hassles of physically possessing it, through Gold ETFs and Fund of Funds (FoFs). Better still, one may invest a small amount through SIP in Gold FoFs. So invest now and enjoy its growth potential. 

Gold as an asset class:

Gold as an investment asset has given reasonable returns (in USD) during the last decade. 

Hedge against other asset class:

Gold, as an asset class has low correlation with other asset classes like equity and bonds. It has low correlation with economic downturn in volatile times and is a good hedge against inflation. Coupled with strong appreciation for over a decade, Gold has emerged as an important asset class for investments in one's portfolio.

Buying Gold ETF is purchasing gold in electronic form. You buy them just like you buy stock of any company from your broker.

Gold ETF makes it easier for you to invest in gold. The investment objective of Gold ETFs is to provide you with returns that closely correspond with the domestic price of real gold. Each Gold ETF unit that you buy is roughly equal to the price of 1 gm of gold.

They are easy to buy since you can even buy just one gram at a time. Over time, you can build up your gold portfolio to the level you want, just as you would with your bank or jeweler, only this is easier.

Capital market

What are Financial markets

Financial market is a market where financial instruments are exchanged or traded andhelps in determining the prices of the assets that are traded in and is also called the pricediscovery process.

1. Organizations that facilitate the trade in financial products. For e.g. Stock exchanges(NYSE, Nasdaq) facilitate the trade in stocks, bonds and warrants.2. Coming together of buyer and sellers at a common platform to trade financial productsis termed as financial markets, i.e. stocks and shares are traded between buyers andsellers in a number of ways including: the use of stock exchanges; directly betweenbuyers and sellers etc.

Financial markets may be classified on the basis of• types of claims – debt and equity markets• maturity – money market and capital market• trade – spot market and delivery market• deals in financial claims – primary market and secondary market

Indian Financial Market consists of the following markets:

o Capital Market/ Securities Marketo Primary capital marketo Secondary capital marketo Money Marketo Debt Market

Primary capital market- A market where new securities are bought and sold for the first time

Types of issues in Primary market

• Initial public offer (IPO) (in case of an unlisted company),• Follow-on public offer (FPO),• Rights offer such that securities are offered to existing shareholders,• Preferential issue/ bonus issue/ QIB placement• Composite issue, that is, mixture of a rights and public offer, or offer for sale

Capital market and money market:

Financial markets can broadly be divided into money and capital market.Money Market: Money market is a market for debt securities that pay off in the short termusually less than one year, for example the market for 90-days treasury bills. This marketencompasses the trading and issuance of short term non equity debt instruments includingtreasury bills, commercial papers, bankers acceptance, certificates of deposits, etc.Capital Market: Capital market is a market for long-term debt and equity shares. In thismarket, the capital funds comprising of both equity and debt are issued and traded. This

also includes private placement sources of debt and equity as well as organized marketslike stock exchanges. Capital market includes financial instruments with more than oneyear maturity

Significance of Capital Markets

A well functioning stock market may help the development process in an economythrough the following channels:1. Growth of savings,2. Efficient allocation of investment resources,3. Better utilization of the existing resources.In market economy like India, financial market institutions provide the avenue by whichlong-term savings are mobilized and channelled into investments. Confidence of theinvestors in the market is imperative for the growth and development of the market. Forany stock market, the market Indices is the barometer of its performance and reflects theprevailing sentiments of the entire economy. Stock index is created to provide investorswith the information regarding the average share price in the stock market. The ups anddowns in the index represent the movement of the equity market. These indices need torepresent the return obtained by typical portfolios in the country.Generally, the stock price of any company is vulnerable to three types of news:• Company specific• Industry specific• Economy specificAn all share index includes stocks from all the sectors of the economy and thus cancelsout the stock and sector specific news and events that affect stock prices, (law of portfoliodiversification) and reflect the overall performance of the company/equity market and thenews affecting it.The most important use of an equity market index is as a benchmark for a portfolio ofstocks. All diversified portfolios, belonging either to retail investors or mutual funds, usethe common stock index as a yardstick for their returns. Indices are useful in modernfinancial application of derivatives.Capital Market Instruments – some of the capital market instruments are:• Equity• Preference shares• Debenture/ Bonds• ADRs/ GDRs• Derivatives

Capital Gains :-

1. Long-term capital gains are usually taxed at a lower rate than regular income. This is done to encourage entrepreneurship and investment in the economy. 

2. Tax conscious mutual fund investors should determine a mutual fund's unrealized accumulated capital gains, which are expressed as a percentage of its net assets, before investing in a fund with a significant unrealized capital gain component. This circumstance is referred to as a fund's capital gains exposure. When distributed by a fund, capital gains are a taxable obligation for the fund's investors.

3. An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be claimed on income taxes. A capital loss is incurred when there is a decrease in the capital asset value compared to an asset's purchase price.

4. Profit that results when the price of a security held by a mutual fund rises above its purchase price and the security is sold (realized gain). If the security continues to be held, the gain is unrealized. A capital loss would occur when the opposite takes place.

Public Provident Fund

Public Provident Fund (PPF) is a savings-cum-tax-saving instrument in India. It also serves as a retirement-planning tool for many of those who do not have any structured pension plan covering them.The account can be opened in Designated Post Offices, State Bank of India branches and branches of some nationalised banks. ICICI Bank was the first private sector bank which was authorized to open PPF accounts.

Individuals who are residents of India are eligible to open an account under the Public Provident Fund scheme. A PPF account may be opened under the name of a minor by his/her legal guardian. However, each person is eligible for only one account under his/her name.Non-resident Indians (NRIs) are not eligible to open an account under the Public Provident Fund Scheme. However a resident who becomes an NRI during the 15 years' tenure prescribed under Public Provident Fund Scheme, may continue to subscribe to the fund until its maturity on a non-repatriation basis..Funds can be transferred via CASH or NRO Account

A minimum yearly deposit of Rs. 500 is required to open and maintain a PPF account, and a maximum deposit of Rs.100000/ can be made in a PPF account in any given financial year. The investments can be made in multiples of Rs. 500, either as a whole sum, or in installments (not exceeding 12 in a year, though more than one deposit can be made in a month). The credit to the PPF account is made on the date of clearance of the cheque, not on the date of its presentationEvery subscription should be made in cash or through a crossed cheque or draft or postal order, in favour of the accounts office, at the place at which that office is situated. In case of any cheque, draft or postal order should be drawn at a bank or post office at that place. It is also possible to transfer funds online using net banking in a PPF account opened with SBI also NEFT Transfer from any bank is possible with sbi ppf accounts.[1]The government of India decides the rate of interest for PPF account. The current interest rate effective from 1 April 2013 is 8.70% Per Annum(compounded annually).[2] Interest is calculated on the lowest balance between the close of the fifth day and the last day of every month. Till March 2010, cheques deposited for clearing, up to 5th of the month were eligible for that month's interest. Since 29 March 2010, only the amounts which are actually cleared on or before the 5th of the month are eligible for that month's interest.

The minimum tenure of the PPF account is 15 years, which can be further extended in blocks of 5 years each for any number of blocks. The extension can be with or without contribution. An account holder, continuing with fresh subscription, can withdraw up to 60% of the balance to his credit at the commencement of each extended period in one or more installments but only once in a year.Nomination facility is available. In the case of joint nominees, it is possible to allocate the percentage of benefits to each nominee.

National Pension Scheme

The National Pension System (NPS) is an Indian Government defined contribution based pension system that was launched as on 01.01.2004.[1] Like most other developing countries, India does not have a universal social security system to protect the elderly against economic deprivation. As a first step towards instituting pension reforms, the Government of India moved from a defined benefit pension to a defined contribution based pension system. Apart from offering wide gamut of investment options to employees, this scheme also helps government of India to reduce its pension liabilities.The problem of Annual Pension Liability was so serious that,it was growing @Compound Rate,where as India's Annual Income is growing @Simple Rate.This would have certainly resulted in the entire collapse of Indian Economic System & Indian Democracy-in the Long Run,making India a defaulter in Defined benefit pension payments to its Retired Employees.There was a threat of Pension Expenses being Greater Than,the Annual Income itself. Now, with the introduction of Defined Contribution Plan,the threat is reducing slowly & steadily,turning India in to An Economic Super Power of the Future,by increasing the value of Indian Rupee.The objective of NPS is to make India,a Zero Pension Liability Nation except for Armed Forces,who pledge their Lives to defend our Nation.One can say that,The NPS is the Soul & Heart of our Nation-India.Unlike Existing Pension Policy of Government of India, that offered assured benefits to those Employees appointed before 2004,the NPS [also called as the New Pension System] has Defined Contribution, and Individuals can decide where to invest their money. The New System is structured into two tiers:Tier-I account: This NPS account does not allow premature withdrawal and was available from 1 May 2009Tier-II account: The tier-II NPS account permits withdrawal prior to retirement age.Since 1 April 2008, the pension contributions of Central Government employees covered by the National Pension System (NPS) are being invested by professional Pension Fund Managers in line with investment guidelines of Government applicable to non-Government Provident Funds. A majority of State Governments have also shifted to the defined contribution based National Pension System from varying dates. 28 State/UT Governments have notified the NPS for their new employees. Of these, 5 states have already signed agreements with the intermediaries of the NPS architecture appointed by Pension Fund Regulatory and Development Authority (PFRDA) for carrying forward the implementation of the National Pension System. The other States are in the process of finalization of documentation

The Pension Fund Regulatory and Development Authority (PFRDA) is the prudential regulator for the NPS.PFRDA was established by the Government of India on 23 August 2003 to promote old age income security by establishing, developing and regulating pension funds. PFRDA has set up a Trust under the Indian Trusts Act, 1882 to oversee the

functions of the Pension Fund Managers (PFMs). The NPS Trust is composed of members representing diverse fields and brings wide range of talent to the regulatory framework. On 18 September 2013 President Pranab Mukherjee gave his assent to PFRDA Bill of 2013, which was passed in the Monsoon Session of Parliament as on 4th in LS & 6th in RS of September 2013.It has now been published in the Gazette of India, Extraordinary, Part-II, Section-1, dated 19 September (Thursday) 2013 as Act No. 23 of 2013. Details are given in www.egazzette.nic.in with respective dates and Acts,under the category of Recent Extra Ordinary Gazettes,having serial no.82 for Ministry of Law and Justice as The Pension Fund Regulatory and Development Authority Act, 2013 & serial no.10 for the Month of September 2013 as the Year. It has been Fortifying India's Financial Future for more than 10 Years & the Total AUMs are Rs.55,000 Crores only, including that of all Central Govt,State Govt & Private Industry Employees of Organised & Unorganised Sectors. Totally there are 55 Lakh Subscribers to NPS on a PAN-India basis.[As per the recent Press Release of www.pfrda.org.in] The PFRDA is the Foundation Stone of Indian Banking & Financial System. The President of India is the Guardian of PFRDA of India, subject to his Financial Emergency Powers, as per the Articles of Indian Constitution.

NPS was made available to all citizens of India on voluntary basis and is mandatory for employees of central government (except armed forces) appointed on or after 1 January 2004. All Indian citizens between the age of 18 and 55 can join the NPS.Tier-I is mandatory for all Govt. servants joining Govt. service on or after 01.01.2004. In Tier I, Govt. servants will have to make a contribution of 10% of his Basic Pay, DP and DA which will be deducted from his salary bill every month. The Govt. will make an equal matching contribution. Since 1 April 2008, the pension contributions of Central Government employees covered by the NPS are being invested by professional Pension Fund Managers in line with investment guidelines of Government. However, there will be no contribution from the Government in respect of individuals who are not Government employees. The contributions and returns thereon would be deposited in a non-withdrawable pension account.In addition to the above pension account, each individual can have a voluntary tier-II withdrawable account at his option. Government will make no contribution into this account. These assets would be managed in the same manner as the pension. The accumulations in this account can be withdrawn anytime without assigning any reason. It’s estimated that 8 crore citizens of India are eligible to join the NPS.

Fixed Deposits and Recurring Depsit

Fixed deposits are a high-interest-yielding Term deposit offered by banks in India. The most popular form of Term deposits are Fixed Deposits, while other forms of term Deposits are Recurring Deposit and Flexi Fixed Deposits (the latter is actually a combination of Demand deposit and Fixed deposit).To compensate for the low liquidity, FDs offer higher rates of interest than saving accounts. The longest permissible term for FDs is 10 years. Generally, the longer the term of deposit, higher is the rate of interest but a bank may offer lower rate of interest for a longer period if it expects interest rates, at which RBI lends to banks ("repo rates"), will dip in the future.[3]Usually in India the interest on FDs is paid every three months from the date of the deposit. (e.g. if FD a/c was opened on 15th Feb., first interest instalment would be paid on 15 May). The interest is credited to the customers' Savings bank account or sent to them

by cheque. This is a Simple FD.[4] The customer may choose to have the interest reinvested in the FD account. In this case, the deposit is called the Cumulative FD or compound interest FD. For such deposits, the interest is paid with the invested amount on maturity of the deposit at the end of the term.[5]Although banks can refuse to repay FDs before the expiry of the deposit, they generally don't. This is known as a premature withdrawal. In such cases, interest is paid at the rate applicable at the time of withdrawal. For example, a deposit is made for 5 years at 8%, but is withdrawn after 2 years. If the rate applicable on the date of deposit for 2 years is 5 per cent, the interest will be paid at 5 per cent. Banks can charge a penalty for premature withdrawal.[4]Banks issue a separate receipt for every FD because each deposit is treated as a distinct contract. This receipt is known as the Fixed Deposit Receipt (FDR), that has to be surrendered to the bank at the time of renewal or encashment.[6]Many banks offer the facility of automatic renewal of FDs where the customers do give new instructions for the matured deposit. On the date of maturity, such deposits are renewed for a similar term as that of the original deposit at the rate prevailing on the date of renewal.Income tax regulations require that FD maturity proceeds exceeding Rs 20,000 not to be paid in cash. Repayment of such and larger deposits has to be either by " A/c payee " crossed cheque in the name of the customer or by credit to the saving bank a/c or current a/c of the customer.

Some Benefits of FD

Customers can avail loans against FDs up to 80 to 90 per cent of the value of deposits. The rate of interest on the loan could be 1 to 2 per cent over the rate offered on the deposit.[7]Resident of India can open these accounts for a minimum or 3 months.

Tax is deducted by the banks on FDs if interest paid to a customer at any bank exceeds Rs. 10,000 in a financial year. This is applicable to both interest payable or reinvested per customer. This is called Tax deducted at Source and is presently fixed at 10% of the interest. With CBS banks can tally FD holding of a customer across various branches and TDS is applied if interest exceeds Rs 10,000. Banks issue Form 16 A every quarter to the customer, as a receipt for Tax Deducted at Source.[8]However, tax on interest from fixed deposits is not 10%; it is applicable at the rate of tax slab of the deposit holder. If any tax on Fixed Deposit interest is due after TDS, the holder is expected to declare it in Income Tax returns and pay it by himself.If the total income for a year does not fall within the overall taxable limits, customers can submit a Form 15 G (below 60 years of age) or Form 15 H (above 60 years of age) to the bank when starting the FD and at the start of every financial year to avoid TDS.

Recurring Deposit

Recurring Deposits are a special kind of Term Deposits offered by banks in India which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits.[1] It is similar to making FDs of a certain amount in monthly installments, for example Rs 1000 every month. This deposit matures on a specific date in the future along with all the deposits made every month. Thus, Recurring Deposit schemes allow customers with an

opportunity to build up their savings through regular monthly deposits of fixed sum over a fixed period of time.The Recurring Deposit can be funded by Standing instructions which are the instructions by the customer to the bank to withdraw a certain sum of money from his Savings/ Current account and credit to the Recurring Deposit every month.When the RD account is opened, the maturity value is indicated to the customer assuming that the monthly installments will be paid regularly on due dates. If any installment is delayed, the interest payable in the account will be reduced and will not be sufficient to reach the maturity value. Therefore, the difference in interest will be deducted from the maturity value as a penalty. The rate of penalty will be fixed upfront. Interest is compounded on quarterly basis in recurring deposits.One can avail loans against the collateral of Recurring deposit up to 80 to 90% of the deposit value.Rate of Interest offered is similar to that in Fixed Deposits. At present it seems to be one of the best method to save the amount yield after years of deposit because TDS is not applicable on RDs.Taxation of Recurring Deposit Tax Deducted at Source ( TDS ) is not applicable on RDs. However interest from RD is not tax free. Income tax is to be paid on interest earned from a Recurring Deposit at the rate of tax slab of the RD holder .

NRI BONDS

Types of accounts which can be maintained by an NRI / PIO in India

A. Non-Resident Ordinary Rupee Account (NRO Account)

NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts.

● Savings Account - Normally maintained for crediting legitimate dues /earnings / income such as dividends, interest etc. Banks are free to determine the interest rates.

● Term Deposits - Banks are free to determine the interest rates. Interest rates offered by banks on NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

● Account should be denominated in Indian Rupees.

● Permissible credits to NRO account are transfers from rupee accounts of non-resident banks, remittances received in permitted currency from outside India through normal banking channels, permitted currency tendered by account holder during his temporary visit to India, legitimate dues in India of the account holder like current income like rent, dividend, pension, interest, etc., sale proceeds of assets including immovable property acquired out of rupee/foreign currency funds or by way of legacy/ inheritance.

● Eligible debits such as all local payments in rupees including payments for investments as specified by the Reserve Bank and remittance outside India of current income like rent, dividend, pension, interest, etc., net of applicable taxes, of the account holder.

● NRI/PIO may remit from the balances held in NRO account an amount not exceeding USD one million per financial year, subject to payment of applicable taxes.

● The limit of USD 1 million per financial year includes sale proceeds of immovable properties held by NRIs/PIOs.

● The accounts may be held jointly with residents and / or with non-resident Indian.

● The NRO account holder may opt for nomination facility.

● NRO (current/savings) account can also be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by sale of foreign exchange brought by him to India. The details of this facility are given in the FAQs on “Accounts opened by Foreign Nationals and Foreign Tourists” available on the RBI website.

● Loans to non-resident account holders and to third parties may be granted in Rupees by Authorized Dealer / bank against the security of fixed deposits subject to certain terms and conditions.

B. Non-Resident (External) Rupee Account (NRE Account)

● NRE account may be in the form of savings, current, recurring or fixed deposit accounts. Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney.

● NRIs as defined in Notification No. FEMA 5/2000-RB dated May 3, 2000 may be permitted to open NRE account with their resident close relatives (relative as defined in Section 6 of the Companies Act, 1956) on ‘former or survivor ‘ basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with the extant instructions during the life time of the NRI/PIO account holder.

● Account will be maintained in Indian Rupees.

● Balances held in the NRE account are freely repatriable.

● Accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively.

● Authorised dealers/authorised banks may at their discretion/commercial judgement allow for a period of not more than two weeks, overdrawings in NRE savings bank accounts, up to a limit of Rs.50,000 subject to the condition that such overdrawings together with the interest payable thereon are cleared/repaid within a period of two weeks, out of inward remittances through normal banking channels or by transfer of funds from other NRE/FCNR accounts.

● Savings - Banks are free to determine the interest rates.

● Term deposits – Banks are free to determine the interest rates of term deposits of maturity of one year and above. Interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

● Permissible credits to NRE account are inward remittance to India in permitted currency, proceeds of account payee cheques, demand drafts / bankers' cheques, issued against encashment of foreign currency, where the instruments issued to the NRE account holder are supported by encashment certificate issued by AD Category-I / Category-II, transfers from other NRE / FCNR accounts, sale proceeds of FDI investments, interest accruing on the funds held in such accounts, interest on Government securities/dividends on units of mutual funds purchased by debit to the NRE/FCNR(B) account of the holder, certain types of refunds, etc.

● Eligible debits are local disbursements, transfer to other NRE / FCNR accounts of person eligible to open such accounts, remittance outside India, investments in shares / securities/commercial paper of an Indian company, etc.

● Loans up to Rs.100 lakh can be extended against security of funds held in NRE Account either to the depositors or third parties.

● Such accounts can be operated through power of attorney in favour of residents for the limited purpose of withdrawal of local payments or remittances through normal banking channels to the account holder himself.

C. Foreign Currency Non Resident (Bank) Account – FCNR (B) Account

● FCNR (B) accounts are only in the form of term deposits of 1 to 5 years

● All debits / credits permissible in respect of NRE accounts, including credit of sale proceeds of FDI investments, are permissible in FCNR (B) accounts also.

● Account can be in any freely convertible currency.

● Loans up to Rs.100 lakh can be extended against security of funds held in FCNR (B) deposit either to the depositors or third parties.

● The interest rates are stipulated by the Department of Banking Operations and Development, Reserve Bank of India. In respect of FCNR (B) deposits of all maturities contracted effective from the close of business in India as on November 23, 2011, interest shall be paid within the ceiling rate of LIBOR/SWAP rates plus 125 basis points for the respective currency/corresponding maturities (as against LIBOR/SWAP rates plus 100 basis points effective from close of business on November 15, 2008). On floating rate deposits, interest shall be paid within the ceiling of SWAP rates for the respective currency/maturity plus 125 basis points. For floating rate deposits, the interest reset period shall be six months.

● When an account holder becomes a person resident in India, deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by him.

● Terms and conditions as applicable to NRE accounts in respect of joint accounts, repatriation of funds, opening account during temporary visit, operation by power of attorney, loans/overdrafts against security of funds held in accounts, shall apply mutatis mutandis to FCNR (B). NRI can open joint account with a resident close relative (relative as defined in Section 6 of the Companies Act, 1956) on former or survivor basis. The resident close relative will be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the life time of the NRI/ PIO account holder.

Portfolio Investment scheme

PIS is a grouping of financial assets such as stocks, bonds and cash equivalents, as well as their mutual, exchange-traded and closed-fund counterparts. Portfolios are held directly by investors and/or managed by financial professionals.Prudence suggests that investors should construct an investment portfolio in accordance with risk tolerance and investing objectives. Think of an investment portfolio as a pie that is divided into pieces of varying sizes representing a variety of asset classes and/or types of investments to accomplish an appropriate risk-return portfolio allocation.

For example, a conservative investor might favor a portfolio with large cap value stocks, broad-based market index funds, investment-grade bonds and a position in liquid, high-grade cash equivalents. In contrast, a risk loving investor might add some small cap growth stocks to an aggressive, large cap growth stock position, assume some high-yield bond exposure, and look to real estate, international, and alternative investment opportunities for his or her portfolio.

Reserve Bank has authorised a few branches of each authorised dealer to conduct the business under Portfolio Investment Scheme on behalf of NRIs. They have to route the applications through any of the designated authorised dealer branches who have authorisation from Reserve Bank of India.

Reserve Bank has authorised a few branches of each authorised dealer to conduct the business under Portfolio Investment Scheme on behalf of NRIs. They have to route the applications through any of the designated authorised dealer branches who have authorisation from Reserve Bank of India.

The repatriation of the sale proceeds are allowed if the original purchase was made on repatriation basis and the sources of investment were from NRE/FCNR account or by means of remittance from abroad. If the original purchase was made from NRO a/c then the sale proceeds are not repatriableInvestment can be made on repatriation as well as non-repatriation basis. However, the investor will have to open NRE account as well as NRO account with the Designated Bank. The sale proceeds of Non-repatriable investment can be collected in NRO A/c only.

The application is to be submitted to a designated branch of an authorised dealer in India in the prescribed form. No permission is required from RBI. Authorised dealer issues general permission for a period of five years, which can be renewed further by designated branch, concerned for a period of five years at a time.

Bonds :-Government bonds –

What is a Government Security?

1.1 A Government security is a tradable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more). In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs). Government securities carry practically no risk of default and, hence, are called risk-free gilt-edged instruments. Government of India also issues savings instruments (Savings Bonds, National Saving Certificates (NSCs), etc.) or special securities (oil bonds, Food Corporation of India bonds, fertiliser bonds, power bonds, etc.). They are, usually not fully tradable and are, therefore, not eligible to be SLR securities.

a. Treasury Bills (T-bills)

1.2 Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 day, 182 day and 364 day. Treasury bills are zero coupon securities and pay no interest. They are issued at a discount and redeemed at the face value at maturity. For example, a 91 day Treasury bill of Rs.100/- (face value) may be issued at say Rs. 98.20, that is, at a discount of say, Rs.1.80 and would be redeemed at the face value of Rs.100/-. The return to the investors is the difference between the maturity value or the face value (that is Rs.100) and the issue price (for calculation of yield on Treasury Bills please see answer to question no. 26). The Reserve Bank of India conducts auctions usually every Wednesday to issue T-bills. Payments for the T-bills purchased are made on the following Friday. The 91 day T-bills are auctioned on every Wednesday. The Treasury bills of 182 days and 364 days tenure are auctioned on alternate Wednesdays. T-bills of of 364 days tenure are auctioned on the Wednesday preceding the reporting Friday while 182 T-bills are auctioned on the Wednesday prior to a non-reporting Fridays. The Reserve Bank releases an annual calendar of T-bill issuances for a financial year in the last week of March of the previous financial year. The Reserve Bank of India announces the issue details of T-bills through a press release every week.

b. Cash Management Bills (CMBs)

1.3 Government of India, in consultation with the Reserve Bank of India, has decided to issue a new short-term instrument, known as Cash Management Bills (CMBs), to meet the temporary mismatches in the cash flow of the Government. The CMBs have the generic character of T-bills but are issued for maturities less than 91 days. Like T-bills, they are also issued at a discount and redeemed at face value at maturity. The tenure, notified amount and date of issue of the CMBs depends upon the temporary cash requirement of

the Government. The announcement of their auction is made by Reserve Bank of India through a Press Release which will be issued one day prior to the date of auction. The settlement of the auction is on T+1 basis. The non-competitive bidding scheme (referred to in paragraph number 4.3 and 4.4 under question No. 4) has not been extended to the CMBs. However, these instruments are tradable and qualify for ready forward facility. Investment in CMBs is also reckoned as an eligible investment in Government securities by banks for SLR purpose under Section 24 of the Banking Regulation Act, 1949. First set of CMBs were issued on May 12, 2010.

c. Dated Government Securities

1.4 Dated Government securities are long term securities and carry a fixed or floating coupon (interest rate) which is paid on the face value, payable at fixed time periods (usually half-yearly). The tenor of dated securities can be up to 30 years.

The Public Debt Office (PDO) of the Reserve Bank of India acts as the registry / depository of Government securities and deals with the issue, interest payment and repayment of principal at maturity. Most of the dated securities are fixed coupon securities.

The nomenclature of a typical dated fixed coupon Government security contains the following features - coupon, name of the issuer, maturity and face value. For example, 7.49% GS 2017 would mean:

Coupon : 7.49% paid on face valueName of Issuer : Government of IndiaDate of Issue : April 16, 2007Maturity : April 16, 2017Coupon Payment Dates : Half-yearly (October 16 and April 16) every yearMinimum Amount of issue/ sale : Rs.10,000

In case there are two securities with the same coupon and are maturing in the same year, then one of the securities will have the month attached as suffix in the nomenclature. For example, 6.05% GS 2019 FEB, would mean that Government security having coupon 6.05 % that mature in February 2019 along with the other security with the same coupon, namely,, 6.05% 2019 which is maturing in June 2019.

If the coupon payment date falls on a Sunday or a holiday, the coupon payment is made on the next working day. However, if the maturity date falls on a Sunday or a holiday, the redemption proceeds are paid on the previous working day itself.

1.5 The details of all the dated securities issued by the Government of India are available on the RBI website at http://www.rbi.org.in/Scripts/financialmarketswatch.aspx. Just as in the case of Treasury Bills, dated securities of both, Government of India and State Governments, are issued by Reserve Bank through auctions. The Reserve Bank announces the auctions a week in advance through press releases. Government Security auctions are also announced through advertisements in major dailies. The investors, are thus, given adequate time to plan for the purchase of government securities through such auctions.

A specimen of a dated security in physical form is given at Annex 1.

1.6 Instruments:

Fixed Rate Bonds – These are bonds on which the coupon rate is fixed for the entire life of the bond. Most Government bonds are issued as fixed rate bonds.

For example – 8.24%GS2018 was issued on April 22, 2008 for a tenor of 10 years maturing on April 22, 2018. Coupon on this security will be paid half-yearly at 4.12% (half yearly payment being the half of the annual coupon of 8.24%) of the face value on October 22 and April 22 of each year.

Floating Rate Bonds – Floating Rate Bonds are securities which do not have a fixed coupon rate. The coupon is re-set at pre-announced intervals (say, every six months or one year) by adding a spread over a base rate. In the case of most floating rate bonds issued by the Government of India so far,the base rate is the weighted average cut-off yield of the last three 364- day Treasury Bill auctions preceding the coupon re-set date and the spread is decided through the auction. Floating Rate Bonds were first issued in September 1995 in India.

For example, a Floating Rate Bond was issued on July 2, 2002 for a tenor of 15 years, thus maturing on July 2, 2017. The base rate on the bond for the coupon payments was fixed at 6.50% being the weighted average rate of implicit yield on 364-day Treasury Bills during the preceding six auctions. In the bond auction, a cut-off spread (markup over the benchmark rate) of 34 basis points (0.34%) was decided. Hence the coupon for the first six months was fixed at 6.84%.

Zero Coupon Bonds – Zero coupon bonds are bonds with no coupon payments. Like Treasury Bills, they are issued at a discount to the face value. The Government of India issued such securities in the nineties, It has not issued zero coupon bond after that.

Capital Indexed Bonds – These are bonds, the principal of which is linked to an accepted index of inflation with a view to protecting the holder from inflation. A capital indexed bond, with the principal hedged against inflation, was issued in December 1997. These bonds matured in 2002. The government is currently working on a fresh issuance of Inflation Indexed Bonds wherein payment of both, the coupon and the principal on the bonds, will be linked to an Inflation Index (Wholesale Price Index). In the proposed structure, the principal will be indexed and the coupon will be calculated on the indexed principal. In order to provide the holders protection against actual inflation, the final WPI will be used for indexation.

Bonds with Call/ Put Options – Bonds can also be issued with features of optionality wherein the issuer can have the option to buy-back (call option) or the investor can have the option to sell the bond (put option) to the issuer during the currency of the bond. 6.72%GS2012 was issued on July 18, 2002 for a maturity of 10 years maturing on July 18, 2012. The optionality on the bond could be exercised after completion of five years tenure from the date of issuance on any coupon date falling thereafter. The Government has the right to buyback the bond (call option) at par value (equal to the face value) while the investor has the right to sell the bond (put option) to the Government at par value at the time of any of the half-yearly coupon dates starting from July 18, 2007.

Special Securities - In addition to Treasury Bills and dated securities issued by the Government of India under the market borrowing programme, the Government of India also issues, from time to time, special securities to entities like Oil Marketing Companies, Fertilizer Companies, the Food Corporation of India, etc. as compensation to these companies in lieu of cash subsidies. These securities are usually long dated securities carrying coupon with a spread of about 20-25 basis points over the yield of the dated securities of comparable maturity. These securities are, however, not eligible SLR securities but are eligible as collateral for market repo transactions. The beneficiary oil marketing companies may divest these securities in the secondary market to banks, insurance companies / Primary Dealers, etc., for raising cash.

Steps are being taken to introduce new types of instruments like STRIPS (Separate Trading of Registered Interest and Principal of Securities). Accordingly, guidelines for stripping and reconstitution of Government securities have been issued. STRIPS are instruments wherein each cash flow of the fixed coupon security is converted into a separate tradable Zero Coupon Bond and traded. For example, when Rs.100 of the 8.24%GS2018 is stripped, each cash flow of coupon (Rs.4.12 each half year) will become coupon STRIP and the principal payment (Rs.100 at maturity) will become a principal STRIP. These cash flows are traded separately as independent securities in the secondary market. STRIPS in Government securities will ensure availability of sovereign zero coupon bonds, which will facilitate the development of a market determined zero coupon yield curve (ZCYC). STRIPS will also provide institutional investors with an additional instrument for their asset- liability management. Further, as STRIPS have zero reinvestment risk, being zero coupon bonds, they can be attractive to retail/non-institutional investors. The process of stripping/reconstitution of Government securities is carried out at RBI, Public Debt Office (PDO) in the PDO-NDS (Negotiated Dealing System) at the option of the holder at any time from the date of issuance of a Government security till its maturity. All dated Government securities, other than floating rate bonds, having coupon payment dates on 2nd January and 2nd July, irrespective of the year of maturity are eligible for Stripping/Reconstitution. Eligible Government securities held in the Subsidiary General Leger (SGL)/Constituent Subsidiary General Ledger (CSGL) accounts maintained at the PDO, RBI, Mumbai. Physical securities shall not be eligible for stripping/reconstitution. Minimum amount of securities that needs to be submitted for stripping/reconstitution will be Rs. 1 crore (Face Value) and multiples thereof.

Put Party bonds or Puttable Bonds

A bond that allows the holder to force the issuer to repurchase the security at specified dates before maturity. The repurchase price is set at the time of issue, and is usually par value.

Puttable bond (put bond, putable or retractable bond) is a bond with an embedded put option. The holder of the puttable bond has the right, but not the obligation, to demand early repayment of the principal. The put option is exercisable on one or more specified dates.[1]This type of bond protects investors: if interest rates rise after bond purchase, the future value of coupon payments will become less valuable. Therefore, investors sell bonds back to the issuer and may lend proceeds elsewhere at a higher rate. Bondholders are ready to pay for such protection by accepting a lower yield relative to that of a straight bond.

Of course, if an issuer has a severe liquidity crisis, it may be incapable of paying for the bonds when the investors wish. The investors also cannot sell back the bond at any time, but at specified dates. However, they would still be ahead of holders of non-puttable bonds, who may have no more right than 'timely payment of interest and principal' (which could perhaps be many years to get all their money back).The price behaviour of puttable bonds is the opposite of that of a callable bond. Since call option and put option are not mutually exclusive, a bond may have both options embedded.

Bondholders have the option of putting bonds back to the issuer either once during the lifetime of the bond (known as a one-time put bond), or on a number of different dates. Of course, the special advantages of put bonds mean that some yield must be sacrificed.

This type of bond is also known as a multimaturity bond, an option tender bond, a variable rate demand obligation (VRDO).

Capital Gain Bonds

Capital bonds are being issued as 'Long term specified assets' within the meaning of Sub- Section 54-EC of the Income Tax Act, 1961. Those desirous of availing exemption from capital gains tax under Section 54 EC may invest in these bonds. Capital gains arising from transfer of Long-term capital assets can be invested in these bonds within a period of six months from the date of transfer of the asset for getting exemption from the capital gains tax.

NHAI BOND

National Highway Authority of India

 Details of 54 EC Capital Gains Bonds of NHAI for the year 2013-14

Credit Rating “AAA/Stable” by CRISIL and “IND AAA/Assigned” by India Ratings & Research

Face Value Rs. 10000/- per BondIssue price Rs. 10000/- per BondMinimum application size

One Bond of Rs. 10,000/-

Maximum application size

Five Hundred Bonds of Rs.10,000/- each (Rs.50,00,000) subject to fulfillment of other conditions as specified in Income Tax Act

Size of the Issue Rs.4,000 CroreMode of Subscription 100% on applicationDeemed Date of Allotment

Last day of the month during which the application amount has been cleared and credited to NHAI’s collection account

Transferability The Bonds are non-transferable, non-negotiable and cannot be Offered as a security for any loan or advance

Maturity At par, 3 years from Deemed Date of AllotmentInterest payment Annually On 1st April and Final Interest at the time

of MaturityCoupon rate 6% P.ARedemption Bullet, at the time of Maturity i.e. 3 yearsTrustee Syndicate Bank

6, Bhagwan Das RoadNew Delhi-110001

Closure of IssueThe issue is open on-Tap Basis and closes on March 31, 2014at the close of the banking hours or on achieving of ceiling limit of Rs.4,000 Crore without any further notice or at a date as may be decided by NHAI at its absolute discretion

REC Bond (Rural Electricity Corporation)

Features of REC bond

• Face Value : Rs. 10000/- per Bond• Minimum Application : One bond of Rs.10000/-• Maximum Application : 500 Bonds of Rs.10000/- • Mode of subscription : 100% on application • Date of Allotment : At the last day of every month• Coupon Rate : 6%   per annum • Maturity : 3 years from Deemed Date of Allotment • Transfer : Non-Transferable. • The application  forms forms can be downloaded from the website:

http://rec.rcmcdelhi.com• All IDBI at CMS enabled locations are authorised to collect the

application.