State Bank of India (SBI) will be able to hawk the Resurgent India Bonds (RIB) to non resident Indians based in the United States of America having finally received the green signal from the Securities Exchange Commission (SEC) of the US.
At a press conference yesterday, N K Puri, chief general manager -foreign offices, SBI said, "SBI has completed all legal formalities for raising funds from the US. The bank has received clearance from US State Banking Department for the floating the bonds and following which a presentation was made to SEC." He said that the delay occurred as the bank had to satisfy the regulatory authority that the RIB basically was a five years deposits similar to FCNR (B) deposits but were marketed as bonds.
Meanwhile, SBI has also approached the Reserve Bank of India (RBI) seeking relaxation for the penalty on premature withdrawals on FCNR (B) deposits. The RBI, in its last monetary policy gave banks freedom to decide on the penalty they desire to charge for premature withdrawals. However, this is made applicable for fresh deposits only. "We have sought RBI permission on deciding the penalty for those deposits that were deposited with SBI before this freedom was granted," said Puri. "SBI has asked the relaxation on behalf of the entire banking sector coupled with the request that it should relaxed only upto September 30," he added. Analyst expect that since the RIB is offering attractive returns as compared to FCNR(B) deposit they will be a flight of capital from FCNR (B) towards RIB and thus net capital inflow would be lower.
Puri said that in case of NRI deposits, SBI has market share of 30 per cent and its total NRI deposits stood at US dollar 2 billion as on March 31, 1998. The NRI deposit have since than grown by five per cent in the first quarter.
Puri said certain clearances are required from individual states in the US for floating the bonds. "The bank is expected to seek clearance from about 12 to 15 states in US in few days of which New York state has already given a nod yesterday," he said.
The RIB, which will open for subscription on August 5, is targeting to raise US $ 2 billion. The bonds have maturity of five years and offers 7.75 per cent in US dollar, 8 per cent in point sterling and 6.25 per cent for DEM.
