Executive Summary:
This notification announces the sale/reissue of Government of India Floating Rate Bonds for an aggregate amount of ₹3,000 crore. The sale will occur through an auction conducted by the Reserve Bank of India (RBI) on April 21, 2017. Successful bidders must make payment on April 24, 2017. The bonds have an eight-year tenure, with repayment due on November 07, 2024.
Key Points / Main Content:
Auction Details:
* Bonds will be sold through the Reserve Bank of India, Mumbai, via a price-based auction using a multiple price auction method.
* The auction will be conducted on April 21, 2017, by the RBI Mumbai Office.
* Bids must be submitted electronically via the Reserve Bank of India Core Banking Solution E-Kuber system on April 21, 2017.
* Non-competitive bids: 10:30 a.m. and 11:30 a.m.
* Competitive bids: 10.30 a.m. and 12:00 noon.
* The result of the auction will be displayed by the Reserve Bank of India at its Fort, Mumbai Office on April 21, 2017.
* Payment by successful bidders is due on April 24, 2017.
Bond Features:
* The Floating Rate Bonds have an eight-year tenure commencing from November 07, 2016, and repayable on November 07, 2024.
* Up to 5% of the notified amount will be allotted to eligible individuals and institutions via the Scheme for Non-competitive Bidding Facility.
* Eligible for When Issued trading, per RBI guidelines.
* Interest at 6.51% will accrue from November 07, 2016, and will be paid on May 07, 2017.
* Subsequent interest payments will be made semi-annually on May 07 and November 07 at a variable rate.
* The variable coupon rate will be based on the average yield of the last three 182-day Treasury Bill auctions before the semi-annual coupon period.
* If 182-day Treasury Bill auctions are discontinued, the coupon rate will be based on the average YTM of six-month Government of India Securities on the last three non-reporting Fridays before the coupon period.
* The RBI will announce the interest rate before each semi-annual coupon period.
* Payment includes accrued interest from November 07, 2016, to April 23, 2017.
Impact Analysis:
Successful Bidders:
* Impact: Required to pay for the allotted stock on April 24, 2017, including accrued interest.
* Action Required: Ensure funds are available for payment on the specified date.
Eligible Individuals/Institutions (Non-Competitive Bidders):
* Impact: Opportunity to be allotted bonds up to 5% of the notified amount.
* Action Required: Submit non-competitive bids between 10:30 a.m. and 11:30 a.m. on April 21, 2017, if interested.
Reserve Bank of India (RBI):
* Impact: Responsible for conducting the auction and announcing the results.
* Action Required: Conduct the auction on April 21, 2017, and announce the results.
Bondholders (Post-Auction):
* Impact: Will receive semi-annual interest payments at a variable rate.
* Action Required: Monitor announcements from the RBI regarding the applicable interest rate for each coupon period.
Key Entities Referenced
Floating Rate Bonds 2024: Government of India's Floating Rate Bonds which will be repaid at par on November 07, 2024.
Reserve Bank of India: The central bank of India, responsible for conducting the auction and displaying the results.
Mumbai Office, Maharashtra: The specific branch of the Reserve Bank of India located in Mumbai where the auction will be conducted.
General Notification F. No. 4 13WM2008: A general notification issued by the Government of India, dated October 8, 2008, that outlines the terms and conditions for the bond sale.
Government of India 182 day Treasury Bills: Short term securities issued by the Government of India, the yields of which are used to determine the variable coupon rate for the bonds.
Scheme for Noncompetitive Bidding Facility in the Auctions of Government Securities Annex: A scheme that allows eligible individuals and institutions to bid non-competitively for up to 5% of the notified amount of the bond sale.
EKuber: The Reserve Bank of India Core Banking Solution system used for submitting bids in electronic format.
Prashant Goyal: Joint Secretary to the Government of India.
Government of India
Ministry of Finance
Department of Economic Affairs
Budget Division
New Delhi, dated April 17, 2017
NOTIFICATION
Auction for Sale (Re-issue) of Government of India Floating Rate Bonds 2024
F. No.4 (7) 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 21, 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 21, 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 21, 2017. The payment by successful bidders will be on April 24, 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 23, 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