Executive Summary:
The Government of India announces the sale/reissue of Floating Rate Bonds 2024 for an aggregate amount of ₹3,000 crore through an auction conducted by the Reserve Bank of India (RBI) on April 7, 2017. The bonds have an eight-year tenure, with repayment on November 7, 2024. Payment by successful bidders is due on April 10, 2017, which includes accrued interest from November 7, 2016.
Key Points / Main Content:
* **Bonds Overview:**
* Bonds are Floating Rate Bonds, maturing on November 7, 2024.
* Aggregate amount for sale/reissue is ₹3,000 crore.
* **Auction Details:**
* Auction conducted by RBI, Mumbai on April 7, 2017.
* Auction method: Price-based using multiple price auction.
* Bids to be submitted electronically via RBI's e-Kuber system on April 7, 2017.
* Non-competitive bids: 10:30 a.m. - 11:30 a.m.
* Competitive bids: 10:30 a.m. - 12:00 noon.
* **Allotment:**
* Up to 5% of the notified amount is allotted to eligible non-competitive bidders.
* **Trading and Tenure:**
* Eligible for "When Issued" trading as per RBI guidelines.
* Tenure: Eight years, commencing from November 7, 2016.
* **Payment and Interest:**
* Payment date: April 10, 2017 (includes accrued interest from November 7, 2016, to April 9, 2017).
* Initial interest rate: 6.51% (accrued from November 7, 2016, paid on May 7, 2017).
* Subsequent interest: Variable rate, paid semi-annually on May 7 and November 7.
* Variable rate calculation: Average of implicit yields of last three 182-day Treasury Bill auctions.
* If 182-day Treasury Bill auctions are discontinued, YTM rates for six-month Government of India Securities will be used.
* RBI will announce the interest rate before each semi-annual coupon period.
Impact Analysis:
* **Successful Bidders:**
* *Impact:* Required to make payment for the allotted bonds, including accrued interest, by April 10, 2017.
* *Action Required:* Ensure funds are available for payment on the specified date.
* **Reserve Bank of India (RBI):**
* *Impact:* Responsible for conducting the auction, displaying results, and announcing interest rates.
* *Action Required:* Conduct the auction on April 7, 2017, display results, and announce subsequent interest rates.
* **Eligible Non-Competitive Bidders:**
* *Impact:* Opportunity to be allotted up to 5% of the bond amount.
* *Action Required:* Submit non-competitive bids between 10:30 a.m. and 11:30 a.m. on April 7, 2017, if interested.
* **Government of India:**
* *Impact:* Raising ₹3,000 crore through the sale/reissue of these bonds.
* *Action Required:* Monitor the auction process and the funds raised.
Key Entities Referenced
Floating Rate Bonds 2024: Government of India bonds being reissued, maturing in 2024.
Ministry of Finance: The ministry responsible for economic policy, financial matters, and budget.
Department of Economic Affairs: A department under the Ministry of Finance, Government of India.
Reserve Bank of India: The central bank of India, responsible for conducting the auction and managing the bonds.
Mumbai, Maharashtra: The city where the Reserve Bank of India office is located and where the auction will be conducted.
General Notification F. No. 4 13WM2008: A general notification issued by the Government of India, providing the terms and conditions for bond sales.
Government of India 182 day Treasury Bills: Short-term debt instruments of the Government of India, used as a benchmark for setting interest rates 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 April 3, 2017
NOTIFICATION
Auction for Sale (Re-issue) of Government of India Floating Rate Bonds 2024
F. No.4 (3) W&M/2017: Government of India hereby notifies sale (re-issue) of Floating Rate Bonds
(hereinafter called 'the Bonds') for an aggregate amount of ` 3,000 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
April 7, 2017. Bids for the auction should be submitted in electronic format on the Reserve Bank of India
Core Banking Solution (E-Kuber) system on April 7, 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 April 7, 2017. The payment by successful bidders will be on April 10, 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 April 09, 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