The government will abandon the zero-coupon bond route for the re-capitalization of public sector banks. Given this information, the Reserve Bank of India is concerned that the Government may take this decision. According to sources, the government is returning to the bonded bond route to replenish capital in public banks. Last year, the government decided to issue zero-coupon bonds to meet the capital requirement of banks in order to alleviate interest and ease financial pressure.

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It was first tested in Punjab and Sindh Bank last year, with six different maturity zero coupon bonds worth Rs 5,500 crore. No interest is payable on these securities for 10 to 15 years. However, the Reserve Bank was concerned about the effective calculation of capital investment made by the bank through this medium of equal value.

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According to sources, there is usually no interest in these bonds, but they are discounted at face value. In this case, it is difficult to find the net present value. For this reason, the government has decided to withdraw from the zero-coupon bond system to replenish capital in banks. The government has made this innovative system to reduce the financial burden. The government has already paid Rs 22,086.54 crore to pay interest on the re-capitalization bonds of public banks in the last two financial years.