Executive Summary:
The Government of India announces the sale/reissue of multiple Government Stocks via auction. The auction, conducted by the Reserve Bank of India (RBI) in Mumbai, will take place on January 4, 2019, with payment due on January 7, 2019. The total notified amount is ₹12,000 Crore, with an option to retain additional subscriptions up to ₹1,000 Crore for any of the securities.
Key Points / Main Content:
Auction Details:
* Auction Date: January 4, 2019, by Reserve Bank of India, Mumbai.
* Bidding: Electronic format via RBI's e-Kuber system on January 4, 2019.
* Non-competitive bids: 11:30 a.m. - 12:00 noon.
* Competitive bids: 11:30 a.m. - 12:30 p.m.
* Payment Date: January 7, 2019.
* Result: Displayed by RBI at its Mumbai office on January 4, 2019.
Securities for Sale/Reissue:
* 6.65 GS 2020: Maturity Apr 09, 2020, Notified Amount ₹2,000 Crore.
* 8.24 GS 2027: Maturity Feb 15, 2027, Notified Amount ₹2,000 Crore.
* GoI FRB, 2031: Maturity Dec 07, 2031, Notified Amount ₹3,000 Crore.
* 7.40 GS 2035: Maturity Sep 09, 2035, Notified Amount ₹2,000 Crore.
* 7.72 GS 2055: Maturity Oct 26, 2055, Notified Amount ₹3,000 Crore.
* The stocks will be sold through a price-based multiple price auction method.
Additional Subscription Option:
* GoI has the option to retain additional subscription up to ₹1,000 Crore against any one or more of the above securities.
Non-Competitive Bidding:
* Up to 5% of the notified amount is allotted to eligible individuals/institutions via non-competitive bidding.
Interest and Repayment:
* Interest accrues from the original issue/last coupon payment date and is paid half-yearly.
* Stock is repaid at par on the maturity date.
* Accrued interest is included in the payment for the stocks from the date of original issue/last coupon payment date to January 6, 2019.
Floating Rate Bond (FRB) Specifics:
* Coupon rate: Base rate (weighted average yield of last 3 auctions of 182 Day T-Bills) + fixed spread of 100 basis points.
* Base rate for Dec 7, 2018 – Jun 6, 2019: 7.05% per annum, therefore interest rate is 8.05% per annum.
Other Conditions:
* Sale subject to terms and conditions in the notification and General Notification F.No.42WM2018, dated March 27, 2018.
* Stocks are eligible for When Issued trading.
Impact Analysis:
Bidders (Individuals and Institutions):
* Impact: Opportunity to invest in government securities.
* Action Required: Submit bids electronically through RBI's e-Kuber system by the specified deadlines on January 4, 2019, and ensure payment by January 7, 2019, if the bid is successful. Non-competitive bidders must submit bids between 11:30 a.m. and 12:00 noon.
Reserve Bank of India (RBI):
* Impact: Responsible for conducting the auction and managing the process.
* Action Required: Conduct the auction on January 4, 2019, display results, and process payments.
Government of India:
* Impact: Raises funds through the sale/reissue of government stocks.
* Action Required: Monitor the auction process and exercise the option to retain additional subscriptions if needed.
Key Entities Referenced
Ministry of Finance: The Indian government ministry responsible for economic and financial matters.
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 conducting auctions of government stocks and regulating the financial system.
Mumbai, Maharashtra: The city in which the Reserve Bank of India's office is located, where the auctions are conducted.
Government Stock: A security issued by the Indian government to borrow money.
6.65 GS 2020: A specific Government Stock with a coupon rate of 6.65% and maturing in 2020.
8.24 GS 2027: A specific Government Stock with a coupon rate of 8.24% and maturing in 2027.
Arvind Shrivastava: 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 December 31, 2018
NOTIFICATION
Auction for Sale (Re-issue) of Government Stock (GS)
F.No.4(6)W&M/2018: Government of India(GoI) hereby notifies sale (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 Rs Crore)
6.65% GS 2020 Apr 09, 2018 02-00-00 Apr 09, 2020 Price Multiple 2,000
8.24% GS 2027 Feb 15, 2007 20-00-00 Feb 15, 2027 Price Multiple 2,000
GoI FRB, 2031 May 07, 2018 13-07-00 Dec 07, 2031 Price Multiple 3,000
7.40% GS 2035 Sep 09, 2005 30-00-00 Sep 09, 2035 Price Multiple 2,000
7.72% GS 2055 Oct. 26, 2015 40-00-00 Oct. 26, 2055 Price Multiple 3,000
Subject to the limit of `12000 Cr, being total notified amount, GoI will have the option to retain additional subscription
up to `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 January 4,
2019. Bids for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking
Solution (E-Kuber) system on January 4, 2019. The non-competitive bids should be submitted between 11.30 a.m.
and 12.00 noon and the competitive bids should be submitted between 11.30 a.m. and 12.30 pm.
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 January 4,
2019. The payment by successful bidders will be on January 7, 2019 i.e. the date of 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.
Date of Coupon
Name of the Coupon rate Date of Last Coupon Date upto which
payments
Security (%) payment accrued interest is due
(month / date)
6.65% GS 2020 6.65 Oct 09, 2018 Jan 6, 2019 Apr 09 and Oct 09
8.24% GS 2027 8.24 Aug 15, 2018 Jan 6, 2019 Feb 15 and Aug 15
GoI FRB 2031 Variable* Dec 07, 2018 Jan 6, 2019 Jun 07 and Dec 07
7.40% GS 2035 7.40 Sep 09, 2018 Jan 6, 2019 Mar 09 and Sep 09
7.72% GS 2055 7.72 Oct 26, 2018 Jan 6, 2019 Apr 26 and Oct 26
* 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 plus a fixed spread, of 100 basis points as
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 coupon period Dec 7, 2018 to Jun 6, 2019 is 7.05% per annum. Accordingly, the rate of
interest on FRB 2031 for this period shall be 8.05% per annum. 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
(Arvind Shrivastava)
Joint Secretary to the Government of India