RBI 7.75% Bonds not available for investment from May 29, 2020

In its press release, the central bank (RBI) said, "The Government of India (GOI), vide notification F.No.4(28)-(W&M)/2017 dated May 27, 2020, hereby announces that 7.75% Savings (Taxable) Bonds, 2018 shall cease for subscription with effect from the close of banking business on Thursday, the 28th of May 2020".

Thus, one can invest in the RBI 7.75% bonds only by 28th May, 2020 end of banking business hours. These bonds are attractive as they offers higher rate of interest and higher degree of safety as compared to other banks fixed deposits and many other financial investment instruments.

However, the bonds have a long tenure with no premature withdrawal i.e. 7 years lock-in period for normal investors, whereas in case of senior citizens is as follows:

• 60-70 years - 6 years

• 70-80 years - 5 years

• 80 years and above - 4 years

An individual can invest as low as Rs 1,000 in these RBI taxable bonds with no maximum investment limit. An investor can opt to receive interest payments either in cumulative or non-cumulative forms.

• Under Cumulative Form: Interest (Compounded half-yearly) will be payable along with the principal amount at the end of the maturity period.

• Under Non-Cumulative Form: Interest will be payable at half-yearly intervals from the date of issue.

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NOTE: As per RBI, interest to the holders opting for non-cumulative Bonds will be paid from the date of issue up to 31st July / 31st January as the case may be, and thereafter interest will be paid half-yearly for the period ending 31st July and 31st January.

Key Highlights of Press Conference by RBI Governor Shaktikanta Das on 22nd May, 2020

• RBI reduces repo rate by 40 basis points from 4.4% to 4% and reverse repo rate is now 3.35%.

• MPC (Monetary Policy Committee) inflation outlook highly uncertain due to the pandemic.

• GDP growth estimated to remain in negative territory.

• Private consumption has seen biggest blow due to COVID-19 outbreak, investment demand has halted.

• Industrial production shrank by close to 17% in March with manufacturing activity down by 21%.

• Inflation may remain firm in first half of year; ease in second half, falling below 4% in Q3/Q4 of FY21.

• Moratorium on term loans are extended for a further period of 3 months i.e. till 31st Aug, 2020.

• Measures announced can be delineated in 4 categories- Measures to improve markets, measures for exports/imports, measures to ease financial stress, measures to reduce state government's financial stress.

Government withdraws order on compulsory wage payment by firms during lockdown

Over the past few days, the industry had petitioned the government to withdraw its order on compulsory wage payment as they were themselves facing cash crunches issues.

On Sunday, the Ministry of Home Affairs (MHA) had issued a fresh set of guidelines which will be applicable from Monday. It has repealed the order dated 29.03.2020 which had talked about compulsory wage payment to workers during lock-down.

Statement issued by MHA:

"Save as otherwise provided in the guidelines annexed to this order, all order issued by the NEC (National Executive Committee) under section 10(2)(I) of the Disaster Management (DM) Act, 2005, shall cease to have effect from 18.05.2020."

Employers have welcome the step, saying it was absolutely necessary especially in absence of grants from the government towards wage payment, whereas Trade union leaders have criticized the government's step to withdraw the order as there will be no wage payment from the employer as well as no wage subsidy from the government.