In an era of falling interest rates, one can still get 9.40 per cent per annum for five years. This at a time when banks are barely offering an average of around 8 per cent on deposits for the same tenure. Government securities, in comparison, offer only 6.22 per cent on five-year paper and 6.66 per cent on seven-year paper.
In its latest offering of retail bonds under the Flexibond umbrella, the Industrial Development Bank of India (IDBI) is offering a whopping 9.40 per cent on its regular income bonds. For a seven-year period, it offers an interest of 9.60 per cent per annum.
In recent times, all insurance companies, including the Life Insurance Corporation, have reduced their rates of interest on single premium policies from around 8 per cent to 7 per cent. However, this may not be strictly comparable because the investor also get tax breaks when he invests in insurance policies.
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IDBI will hit the market with its latest offering of the Flexibond 15 issue with a Rs 300 crore bond issue, which will open on October 10. The issue has a greenshoe option of an equal amount and will close on November 2.
IDBI is offering four instruments in the latest issue: Infrastructure (tax-saving) bonds, Growing Interest bonds, Money multiplier bonds, and the regular income bonds. Compared to its previous issue of such retail bonds, Flexi 14 issue, it has brought down the interest rates by 15-45 basis points. The issue, which closed on August 16, 2002, the corresponding rates of interest were 9.50 per cent and 9.75 per cent.
According to IDBI