Daily Current Affairs Article 30th December 2020: The government has used financial innovation to recapitalise Punjab & Sind Bank by issuing the lender Rs 5,500-crore worth of non-interest bearing bonds valued at par.
Punjab & Sind Bank MD and CEO said these are special types of zero coupon bonds issued by the government after proper due diligence and these are issued at par.
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Since these bonds are not tradable, the lender has kept them in the Held-To-Maturity (HTM) bucket, not requiring it to book any mark-to-market gains or losses from these bonds.
Though these will earn no interest for the subscriber, market participants term it both a ‘financial illusion’ and ‘great innovation’ by the government where it is using Rs 100 to create an impact of Rs 200 in the economy.
Unlike the previous tranches of recapitalisation bonds which carried interest and were sold to different banks, these “non-interest bearing, non-transferable special GOI securities” have a maturity of 10-15 years and issued specifically to Punjab & Sind Bank.
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