The rate of interest on the Floating Rate Bonds, 2016 (FRB, 2016) applicable for the year (May 7, 2011 to May 6, 2012) shall be 7.85 per cent per annum.
It may be recalled that the rate of interest on the FRB, 2016 was set at a mark-up (as decided in the auction held on May 6, 2004) over and above the variable base rate. The variable base rate for payment of interest shall be the average rate (rounded off up to two decimal places) of the implicit yields at cut-off prices emerging in the three auctions of Government of India 364 day Treasury Bills immediately preceding the relative annual coupon reset date.
The variable base rate based on the average rate of the implicit yields at cut-off prices of the said last three auctions of Government of India 364 day Treasury Bills worked out to 7.81 per cent. The mark-up decided in the auction held on May 6, 2004 was (+) 0.04 (plus 0.04). The coupon rate has been fixed accordingly.
The recent hike in Repo rates has already resulted in a hike in rates on home loan, car loan etc across banks. The effect of rate increase for FRBs will be seen in the coming days.