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RBI to auction Rs 1,000cr inflation bonds on June 25

The Reserve Bank of India (RBI) will conduct the second tranche of inflation indexed bonds (IIBs) auction for Rs 1,000 crore on June 25, 2013. These bonds of 10-year tenure (2023) will carry a real yield of 1.44 percent, according to a government notification.

June 20, 2013 / 09:14 AM IST

Moneycontrol Bureau


The Reserve Bank of India (RBI) will conduct the second tranche of inflation indexed bonds (IIBs) auction for Rs 1,000 crore on June 25, 2013. These bonds of 10-year tenure (2023) will carry a real yield of 1.44 percent, according to a government notification.


With a real yield at 1.44 percent, the coupon rate will be around 8.28 percent. Those bonds are linked to the wholesale price index (WPI) based calculations. RBI had earlier mentioned that the monthly final WPI would be used with a lag of four months. Hence, this auction rate is connected to February WPI at 6.84 percent.


Also read: Default rate improves to 1% for MFI loans


In its first auction on June 4 this year, the effective interest rate came at about 8.06 percent. The issue of similar size was fully subscribed.


"Up to 20% (or Rs 200 crore) of the notified amount of the sale of the stocks will be allotted to eligible individuals and Institutions as per the scheme for non-competitive bidding facility in the auction of Government Securities. Both competitive and non-competitive bids for the auction should be submitted in electronic format on the RBI Core Banking Solution (E-Kuber) system on June 25, 2013," RBI said in release issued on Wednesday.


Non-competitive bidders (including retail and select institutional bidders like NBFC) can buy those bonds at the notified cut-off price while competitive bidders have to bid higher price over and above the cut-off price duely notified by the central bank. These bids should be submitted between 10.30 a.m. and 12 noon. The rest 80 percent is slated for institutional bidders through the process of competitive bidding.


Successful bidders now have to make payments on June 26. These bonds are aimed at curbing investment in gold by generating inflation adjusted returns on investment. Earlier, the government had announced plans to issue IIBs worth Rs 15,000 crore in 2013-14.


Both the government as well as the RBI are concerned over the rising gold imports adding to a record high current account deficit (CAD) at 6.7 percent in October-December quarter of FY13. India is the largest consumer of gold.

saikat.das@network18online.com

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