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RBI sets measures for state discom bonds

Bonds, issued by state power distribution companies, will be valued at their current market price, if they are traded and quoted

June 28, 2013 11:04 IST | India Infoline News Service
Government of India had formulated and approved a scheme for financial restructuring of state-owned power distribution companies (Discoms) to enable their turnaround and ensure their long term viability.

The Scheme envisaged the conversion of 50% of the outstanding short term liabilities (as on March 31, 2012) of Discoms to banks into bonds. These bonds will be issued by Discoms and will be serviced by them for a specified initial period till they are taken over by the state governments in a phased manner, RBI said in a notification on Thursday.

However, these bonds will be duly backed by the guarantees of the respective state governments, till the time their liabilities are taken over by them from the Discoms.
If these bonds are traded and quoted, they will be valued at their current ‘Market Value’.

In case the bonds are not traded and quoted, they will be valued on the YTM basis.
During the period, when bonds’ liabilities are with the state Discoms and if guaranteed by respective state governments – 75 basis points and if not guaranteed by respective state governments – 100 basis points.

During the period, when bonds’ liabilities are with the respective state governments – 50 basis points.

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