Section 372A(3) compliance: effective yield on tax-free bonds above bank rate avoids breach under Companies Act. Clarification: where the effective yield on tax-free bonds exceeds the prevailing bank rate, loans to acquire those bonds do not violate the prohibition on lending below the prevailing bank rate under Section 372A(3); the rule compares effective rate of return rather than nominal coupon and is effective from the date of the circular.
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Provisions expressly mentioned in the judgment/order text.
Section 372A(3) compliance: effective yield on tax-free bonds above bank rate avoids breach under Companies Act.
Clarification: where the effective yield on tax-free bonds exceeds the prevailing bank rate, loans to acquire those bonds do not violate the prohibition on lending below the prevailing bank rate under Section 372A(3); the rule compares effective rate of return rather than nominal coupon and is effective from the date of the circular.
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