Govt allows NABARD to issue INR-195-bln zero-coupon bonds by Mar 2027
This story was originally published at 10:32 IST on 13 June 2025
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NEW DELHI – The Central Board of Direct Taxes has allowed National Bank for Agriculture and Rural Development to raise funds by issuing zero-coupon bonds, according to a gazette notification issued Thursday. NABARD can raise INR 195 billion by issuing 1.95 million zero-coupon bonds on or before Mar. 31, 2027, for a period of 10 years eleven months and thirteen days, the notification said. The bonds will be issued at a discount of INR 103.50 billion, it added.
Public sector companies can raise funds through zero coupon bonds only after getting permission from the finance ministry as the Central Board of Direct Taxes has to provide a special tax provision to allow the return on these papers to be classified as capital gains rather than interest income. Capital gains are taxed at a lower rate than corporate tax. Non-interest-bearing bonds, or zero-coupon bonds as they are popularly known, sell at a discount and do not offer any periodic interest payment.
On Jun. 2, the finance ministry had given its approval to REC Ltd. to raise INR 50 billion by issuing zero-coupon bonds. While in may the government had allowed Indian Railway Finance Corp. Ltd. to raise INR 100 billion through this instrument.
This financial instrument had become unpopular and made a comeback in the corporate debt market after a 13-year hiatus with REC's bond issuance in October, which had garnered a strong response from investors, and was subscribed almost 10 times. Before that, REC had issued a similar bond in 2010-11 (Apr-Mar). End
Reported by Sagar Sen
Edited by Akul Nishant Akhoury
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