Companies & Sectors
RIL hits overseas debt markets again, launches over $500-million issue

For the fifth time this fiscal, Mukesh Ambani-led Reliance Industries, which has a surplus cash of over Rs75,000 crore, is raising long-term debt citing historically low interest rates from the overseas markets

Mumbai: Reliance Industries (RIL), which is sitting on over Rs75,000 crore in surplus cash, on Monday launched an issue of bonds in Hong Kong and Singapore markets to raise a minimum $500 million (around Rs2,700 crore), reports PTI quoting company sources.


This is the fifth time that the Mukesh Ambani-led company is raising long-term debt this fiscal. So far, it has raised $4 billion from overseas in the current financial year.


“The company is planning to raise at least $500 million by issuing perpetual bonds. The issue hit the markets today and the final amount will depend on the investor appetite. The initial pricing is 6% over the US treasury,” an RIL official who did not wish to be named told PTI.


Perpetual bonds are those with no maturity date, therefore, it may be treated as equity, not as debt. Perpetual bonds pay coupons forever and the issuer does not have to redeem them. Their cash flows are, therefore, those of perpetuity.


However, he expressed hope that the final pricing will be much below the guidance because of the strong fundamentals of the company.


When asked why it is raising debt despite sitting on over Rs75,000 crore surplus cash, the official said, the interest rates are at historical lows and hence it’s a good time for Reliance to raise long-term money and that the long-term nature of the bond is in line with the long-term assets of the company.


He further said Bank of America, Citi, HSBC, Barclays Deutsche Bank, JP Morgan and RBS are mandated for the issue.


The RIL official also said this first senior long-rated bond issuance by a domestic company.


The funds will be used to meet the capex requirements of the company that runs the world’s largest refinery at Jamnagar.


The senior unsecured perpetual notes have a ‘BBB’ rating from S&P, the rating said in a note.


“The proposed notes will rank equally with all the company's other present and future unsecured and unsubordinated obligations,” S&P said in a note from Singapore.


“The rating on Reliance reflects the company’s strong competitive position and good business diversity. In addition, RIL has low leverage, and strong cash flows and liquidity,” S&P said, adding the positive rating outlook reflects our view that the company has a large cash surplus to protect its financial strength against any potential deterioration in operating conditions.


This bond represents the first senior long dated/perpetual issuance by a domestic issuer after Tata Power’s recent hybrid, the RIL official said, adding only a only a select few Asian issuers have been able to access this market.


The transaction extends Reliance’s maturity profile and establishes Reliance’s credit curve in 10-year, 30-year and perpetual bonds, the official added.


Stating the final pricing will be really tight he said the recent issuances from MNCs like Prudential Plc had 5.25%, Telekom Austria at 5.875%, Banco Do Brasil's at 6.25% and Axa’s a 5.50% among others.


RTI Judgement Series: Display full info about students from EWS on website

The Director of Education, GNCTD was asked to ensure that all information about students from economically weaker sections is displayed in the schools in Hindi and English and also on the department’s website. This is the 28th in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application

Taking a serious note of unavailability of full information about students from economically weaker sections (EWS), the Central Information Commission (CIC), ordered the Director of Education in the Government of National Capital Territory of Delhi (GNCTD) to display the full information on its website and send a compliance report. While giving this important judgement, Shailesh Gandhi, former Central Information Commissioner also asked the Director to ensure that its order is implemented in compliance of Section 4 of the Right to Information (RTI) Act.


“The Director will ensure that all information mentioned above will be displayed in the schools in Hindi and English and also on the website of the Department before 25 January 2010. The Director will send a compliance report to the Commission before 30 January 2010,” the CIC said in its order issued on 21 December 2009.


Delhi resident Ritu Mehra, on 1 December 2009, sent a letter to the Commission pointing out that despite an order from the Commission, the information was not available on the Education department's website.


Earlier on 2 July 2009, the Commission had passed an order directing, KS Yadav, DDE to display on the department’s website, the names and father's names of students from the EWS category for past three years for all schools, on or before 15 August 2009. The Commission, said, it received a letter from Mr Yadav stating that the Commission's order had been complied with and the required information had been uploaded on the website of the department.


After receiving the complaint from Ms Mehra, the Commission, perused the website of the Department and found that the information relating to the EWS admissions is not available in totality and the information that is available on the website is not easily accessible.


Ms Mehra pointed out that pointed out that information about the quota in schools for students from the EWS is not widely disseminated. The EWS quota has been created in private schools which have been granted aid by the government and they are under an obligation under Notification No F/DE/15/ACT/2006/424 dated 25/01/2007 to provide seats to EWS students. Information relating to EWS quota is therefore very crucial to ensure that students from EWS get the opportunity to apply to private schools for good quality education, Mr Mehra said.


Mr Gandhi, the CIC, then directed the Director to ensure that the following was implemented in compliance of Section 4 requirements. All schools will, at a prominent place, display on a notice board:


1. The total no of seats in all classes in a school.

2. The total vacancies in all classes.

3. The total no of seats under EWS quota.

4. Seats still available under EWS quota.

5. Total applications received under EWS quota.

6. Information about when the EWS quota applications will be received and date by which the admissions will be given.


“The schools will also update the information on notice boards once every week. The information needs to be put up in both Hindi and English,” the Commission said in its order.


Mr Gandhi further asked the Education Department to show the Commission a copy of the proposed board before 30 December 2009 and also provide details of students admitted on EWS quota giving their names, their parents’ names on the website within one month of the admission.




Decision No. CIC/SG/C/2009/001627/6018

Complaint No. CIC/SG/C/2009/001627


Complainant                                       : Ritu Mehra,

                                                                  Delhi- 110095 


Respondent                                        : Director of Education,

                                                                Directorate of Education, GNCTD                                                                                                           Old Secretariat, Delhi- 110054


RBI’s revised directive on bulk deposits does not help the large number of bank depositors

Small depositors neither receive the service they have a right to expect nor returns on their deposits commensurate with the inflation prevailing in the country. In order to provide a fair deal to the small depositors, the RBI should introduce improvements in the deposit structure of the banks without any further delay

The Reserve Bank of India (RBI) has come out with revised guidelines on banks offering differential interest rates on bulk deposits effective from 1 April 2013. So far banks were allowed to pay different rates of interest on single deposits of Rs15 lakh and above without defining what is meant by bulk deposits. For the first time RBI in its directive issued on 24 January 2013, has said that all single rupee term deposits of Rs1 crore (Rs10 million) and above will be considered and called as bulk deposits and the following changes in its guidelines have been effected for compliance by banks.

1. All deposits accepted by banks for amounts of Rs1 crore and above will be considered as bulk deposits and such deposits alone can be offered differential interest rates effective from 1 April 2013.

2. All single rupee term deposits eligible for differential interest rates will include domestic term deposits and NRO and NRE deposits, as well. All such bulk deposits should have the same rate of interest for the same period of deposit and this should be made known to the public in advance. In short, banks will be required to publish two different interest rate charts, one for deposits of less than Rs1 crore and another for deposits of Rs1 crore and above. The interest paid by banks should be as per the rate charts and not be subject to negotiation between the depositor and the bank as is the present practise on bulk deposits.

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3. In respect of term deposits of less than Rs1 crore, the banks, on request from the depositor, shall allow withdrawal before maturity and banks cannot reject such requests. However, banks are allowed to charge a penalty for such premature withdrawal, which should be made known to the depositors at the time of making the deposit. At present banks charge a penalty varying from 0.5% to 1% being deducted from the interest rate payable on the deposit for the period for which the deposit has run till the premature withdrawal.

4. In the case of bulk deposits, i.e. deposits of Rs1 crore and above, the RBI has now given full discretion to banks to disallow premature withdrawal of all such deposits whether held in the name of individuals or otherwise. This is in variation with the present provision whereby banksare free to disallow premature withdrawal of large deposits held by entities other than individuals and Hindu Undivided Families (HUFs).

How does this affect the banking public?

Unfortunately, these changes do not help the small depositors in any tangible way. This may have some marginal effect on the big depositors who used to brow-beat the banks and get extra interest from them by negotiation, when the banks faced tight liquidity position. However, the RBI’s tinkering with these deposit rules may be to facilitate better liquidity management by banks and may bring down the volatility in the call money market to some extent. This may also stop any undue favours being shown by banks to big depositors, who can dictate terms by moving large amounts from one bank to another.

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What requires to be done to help small depositors?

The small depositors of banks are the neglected lot today and they are totally at the mercy of the big banks, though they are the people who provide the working capital for banks’ lending operations. They neither receive the service they have a right to expect nor returns on their deposits commensurate with the inflation that prevails in the country. In order to provide a fair deal to the small depositors, the RBI should introduce the following improvements in the deposit structure of the banks without any further delay:

1. The interest paid on all fixed deposits today is compounded on a quarterly basis, whereas banks collect interest on their loans and advances at monthly intervals. This is a clear discrimination against the depositors, who too deserve to receive interest at monthly intervals at the agreed rate. At present if you ask for interest on monthly basis, banks give you interest on your deposit at a small discount to the agreed rate as you are entitled for interest at the agreed rate only at the end of three months. This distinct disparity in paying and receiving interest by banks should be put to an end and equal treatment should be accorded to the deposits accepted and the loans granted by banks.

2. The depositors today receive negative return on their deposits with banks due to the high inflation continuing for a long time. In the case of savings accounts, the RBI cleverly gave the freedom to banks to determine the interest rate on such accounts, hoping that the banks will raise the existing rate of 4% to a reasonable level to offset the rise in cost of living due to the rising inflation persisting for the last over two years. But all the banks, barring a couple of small banks, have stubbornly refused to raise the interest rate causing immeasurable loss to the ordinary banking public, who have been suffering under the rising cost of living for the last couple of years. The RBI should immediately intervene to offer a reasonable rete of return to all SB account holders without any further delay.

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3.While the RBI has come out with guidelines prohibiting banks from levying pre-payment penalty to housing loan borrowers who wish to prematurely repay their loans, surprisingly the central bank has not thought it fit to give similar benefits to depositors who wish to withdraw their deposits before maturity. This blatant discrimination against depositors is a sad commentary on the role of RBI in encouraging inequitable and unfair deal accorded to the depositors of our country. At least the RBI could have brought this regulation in the present guidelines to all deposits other than bulk deposits, so as to provide some relief to those who seek premature withdrawal to meet unforeseen exigencies in difficult period in their lives.

4. Today, banks offer interest rates for different number of days like 200 days, 555 days, 1,000 days, etc. just to make comparisons difficult. Some banks advertise interest rates on the basis of yields instead of simple interest rates per year. There is a need to standardise all such pronouncements and advertisements made in respect of interest rates so that people are not misguided or confused about what is on offer. Just like the government making it mandatory for all packed food articles and consumer goods to be packed and priced in standard packs like 250 gm, 500 gm or 1 kg packs, etc, instead of 225 gm, 450 gm or 950 gm, etc to help people to easily compare the rates with similar competing products, banking products like period of deposit, etc should also be standardised like 46 days, 91 days, 181 days, one year, two years, etc, so that the public could easily compare the rates to arrive at a decision.  Besides, banks should specify only the annual percentage rate of interest, without any jargons like yield, etc so that laymen can easily understand the actual return on their investments. 

Apart from equity and fair-play towards small depositors, simplification and standardisation should be made mandatory for all the banking products for the benefit of financially less literate banking public that are in majority in our country.

To access more articles from Gurpur, please click here.

(The author is a banking professional, writing for Moneylife under the pen-name ‘Gurpur’)



nagesh kini

4 years ago

Earlier deposits of Rs.15lakhs+ were considered "bulk deposits" to make them eligible for a higher rate of interest. This upper limit presently stands at Rs. 1 crore.
This adversely affects smaller NPOs/NGOs carrying out charitable activities that are governed by laws that prevent them from investing their funds in any other modes to earn maximum returns.
Some banks insist that it should be a single deposit and not aggregate of more than one deposit that were placed from time to time out of surplus generation at different points in time.
The facility needs to be relaxed in the case of registered PAN holding approved charities.
After all the individuals, more particularly those in the high income brackets, generally do not go in for bank deposits which provide them far lesser returns when compared to other investing avenues. So there should be no need for such relaxations for super-rich individuals or corporates.
There should be far greater facilities and relaxations by way of higher rates of interest particularly in the case of deposits placed by elders, pensioners, widows, challenged and registered charities.

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