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Frequently Asked Questions on SBI Retail Lower Tier II Bonds

Keywords : SBI Bond Life Insurance Tax 

Who are the eligible investors?

Only Resident Indian Individuals, HUF through the Karta, Partnership Firms through partner, Corporates Banks, Financial Institutions, Insurance Companies, Mutual Funds, Provident/ Superannuation/ Gratuity/ Pension Fund, Private/Public Religious/ Charitable Trust, Co-op. Society can invest in these bonds.

What are the various options I can invest in ?

  1. 1) There are 2 series of bonds Lower Tier II Series 1 10 year Bond with call option at the end of 5 years with an annual coupon payment of 9.25%p.a.
  2. Lower Tier II Series 2 which is a 15 year Bond with call option at the end of 10 years with an annual coupon payment of 9.50% p.a. What is the tenure of these Bonds? There are two series of Bonds
  3. Lower Tier II Series 1 which is a 10 year Bond with call option with SBI at the end of 5 years
  4. Lower Tier II Series 2 which is a 15 year Bond with call option with SBI at the end of 10 years The Bonds will not be redeemable at the option of the Bondholder and all redemptions shall be made by the Bank only with the prior approval of the RBI.

Are these Bonds secured?

These Bonds are not secured.

Is there a Put Option?

These Bonds do not have a put option with the Investor

Is there a Call Option?

Yes. State Bank of India has the option to call the Bonds
1) For Lower Tier II Series 1 - SBI has a call option at the end of 5 years
2) For Lower Tier II Series 2 - SBI has a call option at the end of 10 years

What happens if SBI does not exercise the Call Option?

In case the call option is not exercised by SBI then the coupon on the Bonds shall be increased by 0.50% for the balance tenor of the Bonds.

What is the interest on application money?

The interest on application money will be payable to allottees at coupon rate of the respective Bonds on the amount allotted.

What is the interest on refund?

For applicants who are allotted - 6% of the amount refunded
For applicants who are not allotted 4% of the amount refunded

What is the basis of allotment?

Allocation for all categories of Bonds shall be made on a first come first serve basis based on the date of Application. In case any category is under subscribed the subscriptions received will be allocated first to the Retail Applicants; second to HNIs and then to the NII, Corporates and QIB categories. In case of over subscription, for the applications received on the day of oversupscription, preference will be given to Series 2 Lower Tier II Bonds on a first come first serve basis, in consultation with Designated Stock Exchange / Lead Managers and the balance, if any, will be allotted on a pro rata basis to Series 1 Lower Tier II Bonds in consultation with Designated Stock Exchange / Lead Managers.

What is the Tax Treatment of interest on these Bonds?

The interest received from these bonds will be treated as Income from other sources and shal form part of you total income of the asessee in that financial year in which they are received. There is NO TAX BENEFIT in these bonds.

Are these Bonds Tax Free?

The interest received on these bonds shall be treated as income from other sources and shall form part of the total income of the assessee in that financial year in which they are received. There are no tax benefits of investing in these Bonds. Can a Minor apply for subscription to these bonds? A minor is eligible to apply for subscription to these bonds but only through a guardian Will TDS be deducted on these bonds? No TDS shall be deducted on the interest received as these bonds are issued compulsorily in Demat mode and shall be listed on NSE.

I don't have Demat Account. Can I apply?

The bonds shall be compulsorily issued in Demat mode, so investors without Demat A/c shall not be eligible.

I only have a joint De-mat account. Can I apply in my own name only?

The name of applicant shall be same as the holders of Demat account. In case of single applicant the demat account shall also be held in the name of the same single applicant.

Can I apply in joint names?

Yes application can be made in joint names with a maximum of three applicants, however the demat account shall also be held in the joint names and order of applicant shall be the same as appearing in the demat account. In case of application made in joint names. Can I invest in all the options? Yes an applicant may subscribe to all the options but the minimum application under each option shall be one bond i.e. Rs.10,000/-

I Don't have a PAN card. Can I still apply for subscription?

PAN card is mandatory for subscribing to these bonds.

How will I get my interest on the due date?

The interest shall be credited to the respective Bank account registered with the Demat account on the due date for interest payment, and -if the due date is a public holiday then the next working date.

Where shall I submit the application forms?

The application form may be submitted at the collecting branches of SBI whose address are mentioned on the application forms.

Who shall pay the interest and repay the Principal amount?

State Bank of India shall pay the interest on these bonds and also the principle amount to the Investor upon maturity of the bonds or at the time of exercise of the call option. The bonds are credit rated as "LAAA" with stable outlook indicating safety of highest order Who would get the interest in case of the joint application? In case of joint application the interest shall be paid to the account of the first applicant only.

In whose favour the cheque is to be made?

Cheques has to be made in the favour of "SBI Bonds Public Issue - 2010 Escrow Account"

Can I accept NRI application?

No NRI's are not allowed to invest in this issue. Please check, NRIs on non-repatriate basis can apply.

Shall I also submit the application forms with the collection Bank?


Can I apply through multiple applications?

Though it is advisable to apply through a single application, an applicants may allowed to make one or more applications for the Bonds for the same or other options. Such application will not be deemed as multiple applications and shall not be rejected. However, the applications will be aggregated on the basis of PAN number.

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