What changed
RBI issued detailed clarifications on premature encashment for 6.5% Savings Bonds 2003 on April 12, 2006, clarifying existing provisions from March 2003.
What it means for you
Banks and authorized agents must ensure investors understand that premature encashment is only for the entire amount of a single investment, not partial. For investors with multiple bonds, each can be redeemed independently. Payouts are fixed per Rs.1,000, with a 50% interest recovery on the last six months. This impacts processing of redemption requests and interest warrant handling.
What you must do
- Update internal guidelines to allow only full encashment per single application, no partial withdrawals.
- For multiple investments under same BLA, process each investment number separately as requested.
- Ensure investors surrender post-dated interest warrants (if issued) along with premature encashment request.
- Accept premature encashment requests even after interest warrant dispatch, but require return of latest warrant.
- Use standard discharge certificate (Form 1A) for full amount; no specific form needed for request.
Who it affects
State Bank of India and associate banks, 17 nationalised banks, ICICI, IDBI, HDFC, UTI Bank, Stock Holding Corporation of India (SHCIL), Investors holding 6.5% Savings Bonds 2003 (Non-Taxable)
What is the payout for premature encashment after 3 years?
For non-cumulative bonds, the payout is Rs. 1,016.25 per Rs. 1,000 invested from the 7th half-year onwards. For cumulative bonds, it is Rs. 1,231.25 (7th half-year), Rs. 1,271.20 (8th half-year), and Rs. 1,312.50 (9th half-year). A 50% interest recovery applies for the last six months of the holding period.