Dec. 29, 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.

  • 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.