Floating Interest

Floating Interest – Rate Bonds Redeemable, unsecured BONDS with a fixed maturity date, in the nature of promissory notes, with an interest rate pegged to money market rates or government determined rates, such as term deposits rates offered by banks (rates fixed by the Reserve Bank of India ). Some bonds may carry an interest rate a few percentage points above whatever is the rate to which the bonds are pegged. These bonds may be subordinated, i.e. their claim on the assets of the borrower will be lower than other debts. The State Bank of India recently came out with such bonds carrying interest at 3% p.a. over its maximum term deposit rate, with a minimum assured rate of 12% p.a.

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