ICICI cuts interest rates on bonds

Credit rating agency Care has assigned `AAA’ and Icra has assigned `LAAA’ to the safety bond indicating highest safety in regards to timely payment of principal and interest. ICICI has earlier indicated that it would be paring down the interest rates this year on its safety bonds in line with the general decline in the interest rates. The institution is offering Encash Bond,Regular Income Bond, Money Multiplier Bond and Tax Saving Bond. The issue which will open on July 19 and will close on August 2.

Encash Bonds will offer growing interest rate with an option to withdraw money before maturity at the face value of Rs 5000 after the completion of one year. During the first year, the investor will get 10.5 per cent, in the second year 12.5 per cent and in the third year 13.5 per cent. If the bonds are held till maturity, the annualised yield works out to 12.10 per cent.

The Tax Saving Bond offers five options. Under the first option, the investor gets tax benefit under Section 88, maturity period is three years and interest is 12 per cent per annum on a bond with face value Rs 5000. The second option is a deep discounted bond where Rs 5000 will become Rs 7,225 in three years and three months yielding a return of 12 per cent.

Under the third, fourth and fifth options, the investor will be able to avail of tax benefits under Section 54 EA by investing the proceeds from saleof capital assets. Option III has a monthly income facility, option IV provides for annual payment of interest while option V is in the nature of a deep discount bond. Under the regular income bond the investor can invest for three years and earn regular income on a monthly, half-yearly or annual basis, the statement said.

The money multiplier bond will convert a saving of Rs 5000 into Rs 7,075 in three years in one option, while in the second option Rs 5400 will become Rs 50,000 in 18 years and 11 months.