More fund-raising options for co-op banks

In order to offer a level playing field to co-operative banks, the Reserve Bank of India (RBI) may allow them to use new products for raising funds from the debt market.
The co-operative banks could come out with subordinate debt structures like tier-II bonds, tier-III bonds and upper tier-II or perpetual bonds to raise finance.

At present, these banks get financed from the National Bank for Agricultural and Rural Development (Nabard) to on-lend. A part of its funding also comes from the state government. They do not have independent fund-raising options.

In a meeting held recently, RBI and the Securities and Exchange Board of India have in principle zeroed in on the National Stock Exchange (NSE) as the favoured platform for launching the currency futures trading in India.However, NSE may have to float an independent subsidiary to start currency futures. RBI has set up a committee to look into the operational details for launching currency futures.

ICICI Bank buys back $50 mln of bonds

ICICI Bank, India’s second biggest bank, said on Monday it had bought back and retired bonds with a face value of $50 million that were due to mature in 2012, its second such transaction in March.The bonds, which had a 5.75% coupon, were issued by the bank’s Bahrain branch.

On 8 March, it had said it has bought back and retired $50 million of bonds with a 6.625% coupon that were due to mature in 2012 and were also issued by its Bahrain branch.

BoM to raise Rs 200 cr from bonds

Bank of Maharashtra (BoM) on Monday said it will raise up to Rs 200 crore from Tier II bonds to augment its capital adequacy requirements.It would be unsecured, non-convertible redeemable subordinated Upper Tier II bonds in the nature of promissory notes, BoM informed the Bombay Stock Exchange.

The bonds will carry coupon rate of 10.35 per cent per annum for a period of first 10 years with a step-up coupon rate of 10.85 per cent annualy for the remaining 5 years if call option is not exercised at the end of 10th year from the date of allotment, it said.

The issue opens for subscription tomorrow and closes on July 23. The deemed date for allotment is July 25.

Corporate bonds to trade on bourses from July 1

The Securities and Exchange Board of India (Sebi) will ask the two stock exchanges to start trading in corporate bonds shortly, sources close to the developments said.The much-awaited trading in corporate bonds will start on the National and the Bombay Stock Exchanges from July 1. This is expected to energise the moribund debt market.

To begin with, trading would be through order matching as recommended by the R H Patil Committee. The committee had suggested various measures to activate the corporate bond market. The anonymous order matching would come into place only at a later stage, when the exchanges were ready, the sources added.

Banks and institutions will be allowed to trade through either the stock exchanges or via the OTC (over-the -counter). If they wanted to go through the stock exchanges, they could conduct the trading through the stock broking members, the sources added.

All transactions in corporate bonds of the value of Rs 1 lakh or above are required to be reported to the corporate bond platform. As the platform is purely for reporting purposes, the stock exchanges had no role or liability for settlement of these trades. The intermediaries and contracting parties were asked to settle the trades bilaterally.

Read more in The Business Standard article.