Scheduled banks are empowered to issue zero coupon bonds

Under the existing provision of clause (48) of section 2, only infrastructure capital company or infrastructure capital fund or public sector company are empowered to issue zero coupon bonds when they are authorized to do so.

With a view to empower the scheduled banks including nationalized banks to issue zero coupon bonds to source their long term funds, it is proposed to amend the section so as to include the scheduled banks as an eligible person to issue zero coupon bonds.

Further, it is proposed to make consequential amendments in Explanation to clause (iiia) of sub-section (1) of section 36 and in clause (x) of sub-section (3) of section 194A of the Income-tax Act.
These amendments will take effect from 1st April, 2009.