Executive Summary:
This notification announces the sale/reissue of Government of India Floating Rate Bonds for an aggregate amount of ₹2,000 crore. The auction will be conducted by the Reserve Bank of India (RBI) on February 3, 2017, and payment by successful bidders is due on February 6, 2017. The bonds have an eight-year tenure, maturing on November 7, 2024, and are subject to the terms and conditions outlined in this and a previous general notification.
Key Points / Main Content:
* **Bond Details:**
* Bonds are Floating Rate Bonds maturing on November 7, 2024.
* Aggregate amount for sale/reissue: ₹2,000 crore nominal.
* **Auction Process:**
* The sale will be conducted through the Reserve Bank of India (RBI) via a price-based auction using a multiple price auction method.
* Auction Date: February 3, 2017.
* Bids must be submitted electronically on the RBI's e-Kuber system.
* Non-competitive bids: 10:30 a.m. to 11:30 a.m.
* Competitive bids: 10:30 a.m. to 12:00 noon.
* Up to 5% of the notified amount will be allotted to eligible non-competitive bidders.
* The result of the auction will be displayed by the RBI on February 3, 2017, at its Mumbai office.
* **Payment and Issue:**
* Payment by successful bidders: February 6, 2017.
* Payment includes accrued interest from November 7, 2016, to February 5, 2017.
* **Interest Rate:**
* Initial interest rate: 6.51% accruing from November 7, 2016, to be paid on May 7, 2017.
* Subsequent interest payments will be made semi-annually on May 07 and November 07 at a variable rate.
* The variable rate will be based on the average yield of the last three 182-day Treasury Bill auctions.
* If 182-day Treasury Bill auctions are discontinued, the rate will be based on the YTM of six-month Government of India Securities.
* The RBI will announce the applicable interest rate before each semi-annual coupon period.
* **Trading:**
* The stock will be eligible for "When Issued" trading.
Impact Analysis:
* **Bidders (Individuals and Institutions):**
* Impact: Opportunity to invest in Government of India Floating Rate Bonds.
* Action Required: Submit bids electronically through the RBI's e-Kuber system within the specified timeframes on February 3, 2017, and make payment by February 6, 2017, if successful.
* **Reserve Bank of India (RBI):**
* Impact: Responsible for conducting the auction, displaying results, and announcing interest rates.
* Action Required: Conduct the auction on February 3, 2017, display the results at its Mumbai office, and announce the applicable interest rate before each semi-annual coupon period.
Key Entities Referenced
Ministry of Finance: The ministry within the Government of India responsible for financial matters.
Department of Economic Affairs: A department within the Ministry of Finance responsible for economic policy and development.
Floating Rate Bonds 2024: A type of government security being reissued, maturing in 2024, with a variable interest rate.
Reserve Bank of India: The central bank of India, responsible for conducting the auction and managing government securities.
Mumbai, Maharashtra: The city where the Reserve Bank of India office involved in the auction is located.
General Notification F. No. 4 13WM2008, dated October 8, 2008: A previously issued notification providing the general terms and conditions for government bond auctions.
Government of India 182 day Treasury Bills: Short-term debt instruments issued by the Government of India, used as a benchmark for determining the variable interest rate on the Floating Rate Bonds.
Prashant Goyal: Joint Secretary to the Government of India, signing the notification.
Government of India
Ministry of Finance
Department of Economic Affairs
Budget Division
New Delhi, dated January 30, 2017
NOTIFICATION
Auction for Sale (Re-issue) of Government of India Floating Rate Bonds 2024
F. No.4 (3) W&M/2016: Government of India hereby notifies sale (re-issue) of Floating Rate Bonds
(hereinafter called 'the Bonds') for an aggregate amount of ` 2,000 crore (nominal). The sale will be
subject to the terms and conditions spelt out in this notification (called ‘Specific Notification’) as also the
terms and conditions specified in the General Notification F. No. 4 (13)–W&M/2008, dated October 8,
2008 issued by Government of India.
Method of Issue
2. The Bonds will be sold through Reserve Bank of India, Mumbai Office, Fort, Mumbai- 400 001 in the
manner as prescribed in paragraph 5.1 of the General Notification F. No. 4 (13)–W&M/2008, dated
October 8, 2008 by a price based auction using multiple price auction method.
Allotment to Non-competitive Bidders
3. The Bonds 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
4. The auction will be conducted by Reserve Bank of India, Mumbai Office, Fort, Mumbai-400 001 on
February 03, 2017. Bids for the auction should be submitted in electronic format on the Reserve Bank of
India Core Banking Solution (E-Kuber) system on February 03, 2017. 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
5. The Stock will be eligible for “When Issued” trading in accordance with the guidelines issued by the
Reserve Bank of India.
Tenure
6. The Floating Rate Bonds will be of eight years tenure commencing from November 07, 2016. The
Bonds will be repaid at par on November 07, 2024.
Date of issue and payment for the stock
7. The result of the auction shall be displayed by the Reserve Bank of India at its Fort, Mumbai Office on
on February 03, 2017. The payment by successful bidders will be on February 06, 2017. i.e. the date of
re-issue. The payment for the Stock will include accrued interest on the nominal value of the Stock
allotted in the auction from the date of original issue i.e., November 07, 2016 to February 05, 2017.
Interest
8. (i) Interest at a rate of 6.51% will accrue from November 07, 2016 (date of original issue) and will be
paid on May 07, 2017. For the subsequent periods, the interest at a variable rate will be paid every half-
yearly on May 07 and November 07.
(ii) The variable coupon rate for payment of interest on subsequent semi-annual period shall be the
average rate rounded off up to two decimal places, of the implicit yields at the cut-off prices of the last
three auctions of Government of India 182 day Treasury Bills, held up to the commencement of
the respective semi-annual coupon period. 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 coupon rate 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 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 India