Executive Summary:
This notification from the Indian Ministry of Finance announces the sale/issue/reissue of several Government Stocks (GS). The auction, conducted by the Reserve Bank of India (RBI), is scheduled for May 04, 2018, with payment due on May 07, 2018. The total notified amount is Rs 12000 Cr, with an option to retain additional subscriptions up to Rs 1000 Cr against any one or more of the securities.
Key Points / Main Content:
Auction Details:
* Auction Date: May 04, 2018, conducted by RBI Mumbai.
* Bidding: Electronic bids via RBI's E-Kuber system on May 04, 2018. Non-competitive bids: 10:30 a.m. - 11:30 a.m.; Competitive bids: 10:30 a.m. - 12:00 noon.
* Payment Date: May 07, 2018.
* When Issued Trading: The stocks are eligible for When Issued trading as per RBI guidelines.
* Result Display: RBI to display auction results at its Mumbai office on May 04, 2018.
Government Stock Details:
* Securities for sale/issue/reissue include: 6.65 GS 2020, 7.59 GS 2026, New GoI FRB 2031, 6.57 GS 2033, and 7.06 GS 2046.
* The government retains the option to retain additional subscriptions up to Rs 1000 Cr against any one or more of the above securities, subject to the total notified amount limit of Rs 12000 Cr.
* A portion (up to 5% of the notified amount) will be allotted to eligible individuals/institutions via a non-competitive bidding facility.
Interest and Repayment:
* Interest is paid semi-annually from the original issue/last coupon payment date.
* Stocks are repaid at par on the maturity date.
* Accrued interest is included in the payment for the stocks.
* New GoI FRB 2031: Variable interest rate paid semi-annually, based on the Weighted Average Yield of the last 3 auctions from the rate fixing day of 182 Day TBills, plus a fixed spread determined by auction. The base rate for the first coupon payment is 6.33%.
Impact Analysis:
Bidders (Individuals and Institutions):
* Impact: Opportunity to acquire Government Stocks through competitive and non-competitive bidding processes.
* Action Required: Submit bids electronically via RBI's E-Kuber system within the specified timeframe on May 04, 2018. Ensure payment by May 07, 2018, if the bid is successful. Eligible individuals and institutions can participate in the Non-Competitive Bidding Facility.
Reserve Bank of India (RBI):
* Impact: Responsible for conducting the auction, displaying results, and managing the E-Kuber system.
* Action Required: Conduct the auction on May 04, 2018, display results, and facilitate payment processing on May 07, 2018.
Government of India (GoI):
* Impact: Issuance of Government Stocks to manage government finances.
* Action Required: Oversee the auction process and manage the funds raised through the sale of these stocks.
Holders of Government Securities:
* Impact: The value of existing holdings may be affected by the new issuance
* Action Required: No action is required.
Key Entities Referenced
Ministry of Finance: The ministry responsible for economic and financial matters in the Government of India.
Department of Economic Affairs: A department within the Ministry of Finance responsible for economic policy and development.
Reserve Bank of India: The central bank of India, responsible for regulating the banking system and managing the country's currency.
Mumbai, Maharashtra: A city in Maharashtra where the Reserve Bank of India's office that handles government securities auctions is located.
Government Stock: Debt instruments issued by the Government of India to raise funds from the market.
New GoI FRB 2031: A floating rate bond issued by the Government of India maturing in 2031.
6.65 GS 2020: Government Stock with a coupon rate of 6.65% maturing in 2020.
182 Day TBills: 182-day Treasury Bills, used as a base rate for determining interest on floating rate bonds.
Government of India
Ministry of Finance
Department of Economic Affairs
Budget Division
New Delhi, dated April 27, 2018
NOTIFICATION
Auction for Sale (Issue/Re-issue) of Government Stock (GS)
F.No.4(6)W&M/2018: Government of India(GoI) hereby notifies sale (issue/re-issue) of the following Government
Stocks:
Date of Tenure Date of Notified Amount
Name of the Security Base Method
Original Issue (yy-mm-dd) Maturity (in ` Crore)
6.65% GS 2020 Apr 09, 2018 02-00-00 Apr 09, 2020 Price Multiple 2000
7.59% GS 2026 Jan 11, 2016 10-00-00 Jan 11, 2026 Price Multiple 3000
New GoI FRB 2031 May 07, 2018 13-07-00 Dec 07, 2031 Spread Multiple 3000
6.57% GS 2033 Dec 05, 2016 17-00-00 Dec. 05, 2033 Price Multiple 1000
7.06% GS 2046 Oct 10, 2016 30-00-00 Oct 10, 2046 Price Multiple 3000
Subject to the limit of Rs 12000 Cr, being total notified amount, GoI will have the option to retain additional
subscription up to Rs 1000 Cr each against any one or more of the above securities. The sale will be subject to the
terms and conditions spelt out in this notification (called ‘Specific Notification’). The Stock will be sold through Reserve
Bank of India, Mumbai Office, Fort, Mumbai- 400 001 as per the terms and conditions specified in the General
Notification F.No.4(2)–W&M/2018, dated March 27, 2018 issued by Government of India.
Allotment to Non-competitive Bidders
2. The Government Stock up to 5% of the notified amount of the sale will be allotted to eligible individuals and
institutions as per the enclosed Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities
(Annex).
Place and date of auction
3. The auction will be conducted by Reserve Bank of India, Mumbai Office, Fort, Mumbai-400 001 on May 04, 2018.
Bids for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking Solution (E-
Kuber) system on May 04, 2018. The non-competitive bids should be submitted between 10.30 a.m. and 11.30 a.m.
and the competitive bids should be submitted between 10.30 a.m. and 12.00 noon.
When Issued Trading
4. The Stock will be eligible for “When Issued” trading in accordance with the guidelines issued by the Reserve Bank
of India.
Date of issue and payment for the stock
5. The result of the auction shall be displayed by the Reserve Bank of India at its Fort, Mumbai Office on May 04,
2018. The payment by successful bidders will be on May 07, 2018 i.e. the date of issue/re-issue. The payment for the
stocks will include accrued interest on the nominal value of the Stock allotted in the auction from the date of original
issue / last coupon payment date to the date upto which accrued interest is due as mentioned in the table in para 6.
Payment of Interest and Re-payment of Stock
6. Interest will accrue on the nominal value of the Stock from the date of original issue / last coupon payment and
will be paid half yearly. The Stock will be repaid at par on date of maturity.
Name of the Coupon rate (%) Date of Last Date upto which Date of Coupon
Security Coupon payment accrued interest is payments (month /
due date)
6.65 New Stock Apr 09 – May 06, Oct 09 and Apr 09
6.65% GS 2020
2018
7.59% GS 2026 7.59 Jan 11, 2018 May 06, 2018 July 11 and Jan 11
New GoI FRB 2031 Variable* New Stock New Stock Jun 07 and Dec 07
6.57% GS 2033 6.57 Dec 05, 2017 May 06, 2018 Jun 05 and Dec 05
7.06% GS 2046 7.06 April 10, 2018 May 06, 2018 Oct 10 and Apr 10
* New GoI FRB 2031*
(i) The interest at a variable rate will be paid every half-yearly.
(ii) The Floating Rate Bond will carry the coupon, which will have a base rate, equivalent to Weighted Average Yield
(WAY) of last 3 auctions (from the rate fixing day) of 182 Day T-Bills (Please see Annex for illustration), plus a fixed
spread, to be decided by way of auction mechanism. The spread will be fixed throughout the tenure of the bond. The
implicit yields will be computed by reckoning 365 days in a year.(iii) In the event of Government of India 182-day Treasury Bill auctions being discontinued during the currency of the
Bonds, the base rate of the coupon will be the average of Yield to Maturity (YTM) rates prevailing for six month
Government of India Security/ies as on the last three non-reporting Fridays prior to the commencement of the semi-
annual coupon period. In case particular Friday/s is/are holiday/s, the yield to maturity rates as on the previous
working day shall be taken.
(iv) The base rate for the first coupon payment for period ending June 07, 2018 shall be 6.33 per cent. The rate of
interest payable half yearly on the Bonds during the subsequent years shall be announced by the Reserve Bank of
India before the commencement of the relative semi-annual coupon period
By Order of the President of India
(Prashant Goyal)
Joint Secretary to the Government of IndiaAnnex
Illustration: Base Rate payable on Floating Rate Bonds 2031
Calculation of base rate for the first coupon payment for period ending June 07, 2018
S.No. 182 DTB auction Weighted Average Weighted Average
dated Price Yield (%)
1 April 25, 2018 96.91 6.3971
2 April 18, 2018 96.95 6.3038
3 April 11, 2018 96.96 6.2878
Total 18.9887
@ annualized for 365 day year
Base Rate = (18.9887 / 3) = 6.3296
Rounded off to two decimal places = 6.33 per cent per annum