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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Debt Instruments and Government Securities

Mr. Iyer holds Rs 10 lakh face value of a 7% corporate bond in his demat account. The bond pays interest every half-year. Which statement about the interest payment is correct?

Interest on a demat bond goes to whoever the depository's records show as beneficial owner on the record date. The issuer's registrar uses the depository's benpos data to identify holders, so the DP itself is not the recipient and the payment is not made in bonds.

  1. AThe interest is credited on the record date to the person whose name appears as beneficial owner in the depository's recordsCorrect
  2. BThe interest is paid to the seller if the bond was sold after the record date, with no adjustment needed
  3. CThe interest is paid only to the DP, not the investor
  4. DThe interest is paid in new bonds only

Explanation

Payments on debt securities go to the holders whose names appear in the depository's records as beneficial owners on the record date. Half-yearly interest on Rs 10 lakh at 7% would be Rs 35,000. The second option is wrong because a holder on the record date receives the payment, and the seller is not entitled when the sale settles before it.

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