The issue of India’s Inflation Indexed National Savings Securities-Cumulative (IINSS-C) for retail investors will open for subscription on December 23, 2013 and close on December 31, 2013. The subscription can be closed earlier than December 31, 2013 with prior notice.
It may be recalled that the Reserve Bank of India, in consultation with Government of India, on November 29, 2013 announced issuance of Government of India’s Inflation Indexed National Savings Securities-Cumulative (IINSS-C) for retail investors.
Interest rate on these securities would be linked to final combined Consumer Price Index [CPI (Base: 2010=100)]. Interest rate would comprise two parts, i.e., fixed rate (1.5% per annum) and inflation rate based on CPI and the same will be compounded in the principal on half-yearly basis and paid at the time of maturity. The final combined CPI will be used with a lag of three months, i.e., final combined CPI for September 2013 will be used as reference CPI for all days of December 2013.
Early redemptions will be allowed after one year from the date of issue for senior citizens (i.e., 65 years and above of age) and 3 years for all others, subject to penalty charges at the rate of 50% of the last coupon payable for early redemption. Early redemptions, however, can be made only on coupon dates.
The eligible investors would include individuals, Hindu Undivided Family, Charitable Institutions registered under section 25 of the Indian Companies Act and Universities incorporated by Central, State or Provincial Act or declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956).
As distribution/ sale of IINSS-C would be through banks, eligible investors may approach the branches of State Bank of India, Associate Banks, Nationalised Banks, three private sector banks (viz. HDFC Bank Ltd., ICICI Bank Ltd. and Axis Bank Ltd.) and Stock Holding Corporation of India Ltd. during working hours.
Inflation Indexed National Savings Securities- Cumulative, 2013
December 19, 2013
The Chairman & Managing Director
Head Office (Government Accounts Department)
State Bank of India & Associate Banks
All Nationalised Banks
ICICI Bank Ltd., HDFC Bank Ltd, Axis Bank Ltd., and
Stock Holding Corporation of India Ltd (SHCIL).
Inflation Indexed National Savings Securities- Cumulative, 2013
It has been decided by the Government of India, as per their Notification F.No. 4(16) W&M/2012 dated December 19, 2013, to issue Inflation Indexed National Savings Securities- Cumulative, 2013 (“the Bonds”) with effect from December 23, 2013 to December 31, 2013. The Government of India reserves the right to close the issue earlier than December 31, 2013. The terms and condition of the issue of the Bonds shall be as follows:
2. Eligibility for Investment
The Bonds may be held by:-
i) an individual, not being a Non-Resident Indian-
ii) a Hindu Undivided Family (HUF)
iii) (a) ‘Charitable Institution’ to mean a Company registered under Section 25 of the Indian Companies Act 1956, or
(b) an institution which has obtained a Certificate of Registration as a charitable institution in accordance with a law in force; or
(c) any institution which has obtained a certificate from Income Tax Authority for the purposes of Section 80G of the Income Tax Act, 1961.
iv) ‘University’ means a university established or incorporated by a Central, State or Provincial Act, and includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of 1956), to be a university for the purposes of that Act.
3. Limit of Investment
Minimum limit for investment in the bonds is `5,000/- and maximum limit for investment is `5,00,000/- per applicant per annum.
4. Tax Treatment
Income Tax: Interest on the Bonds will be taxable under the Income-Tax Act, 1961 as applicable according to the relevant tax status of the bonds holder.
5. Issue Price
i) The Bonds will be issued at par, i.e. at 100.00 per cent.
ii) The Bonds will be issued for a minimum amount of `5,000/- (face value) and in multiples thereof. Accordingly, the issue price will be `5,000/- for every `5,000/-(Nominal).
Subscription to the Bonds will be in the form of Cash/Drafts/Cheques/online through internet banking. Cheques or drafts should be drawn in favour of the bank (Receiving Office), specified in paragraph 10 below and payable at the place where the applications are tendered.
7. Date of Issue
The date of issue of the Bonds in the form of Bonds Ledger Account will be opened (issued) from the date of receipt of funds/realisation of draft/cheque.
i) The Bonds will be issued only in the form of Bonds Ledger Account and may be held at the credit of the holder in an account called Bonds Ledger Account (BLA).
ii) The Bonds will be issued in the form of Bonds Ledger Account and held with Reserve Bank of India. A certificate of holding as specified in ‘Form I’ (attached) will be issued to the holder of Bonds in Bonds Ledger Account.
i) Applications for the Bonds may be made in the application format attached or in any other form as near as thereto stating clearly the amount and the full name and address of the applicant.
ii) Applications should be accompanied by the necessary payment in the form of cash/drafts/cheques/online through internet banking as indicated in paragraph 6 above.
Note:- The authorised banks are responsible to ensure compliance with the applicable KYC norms. The application form and the requisite documentation are to be retained by the authorised banks for record and future reference.
10. Receiving Offices
Applications for the Bonds in the form of Bonds Ledger Account will be received at:
(a) Branches of State Bank of India, Associate Banks, Nationalised Banks, three private sector banks (i.e. HDFC Bank Ltd., ICICI Bank Ltd., AXIS Bank Ltd.) and SHCIL during their working hours.
(b) Any other bank or number of branches of the banks and SHCIL where the applications will be received as specified by the Reserve Bank of India in this behalf from time to time.
The Bonds in the form of Bonds Ledger Account shall be transferable to nominee(s) on death of holder (only individual/s).
The Bonds will bear interest at the rate of 1.5% (fixed rate) per annum + inflation rate calculated with respect to final combined Consumer Price Index [(CPI) Base; 2010 = 100]. Final combined CPI will be used with a lag of three months to calculate incremental inflation rate (i.e. final combined CPI for September would be used as reference CPI for all days of December). Interest will be compounded with half-yearly rests and will be payable on maturity along with the principal.
14. Advances/Tradability against Bonds
The Bonds shall not be tradable in the secondary market. The Bonds shall be eligible as collateral for loan from banks, Financial Institutions and Non-Banking Financial Company (NBFC). The lien to that effect will be marked in the depository (RBI) by the authorised banks.
16. Handling charges
Handling charges at the rate of `1.00 (Rupee one only) per `100.00 will be paid to the authorised banks on the subscription received by them from investors.
Encls.: As above.
FAQ on Inflation Indexed National Saving Securities – Cumulative (IINSS-C)
1. Who is eligible to invest in the Inflation Indexed National Saving Securities-Cumulative (IINSS-C)?
2. What is the interest rate on these securities?
3. Is there any floor as inflation may turn into deflation at times?
4. When do I get interest?
5. What will I get on redemption?
6. What is the inflation index to which inflation rate will be linked?
7. What will be the process of investing?
8. What will be the form of these securities?
9. Which are the authorised banks?
10. Should the customer apply through the bank in which he/she has an account?
11. Who will provide the other customer services to the investors after issuance of securities?
12. Whether joint holding will be allowed?
13. What is the minimum and maximum limit for investment?
14. Whether premature redemption is allowed?
15. How do I redeem these securities?
16. Whether these securities transferable?
17. Can I use these securities as collateral for loans?
18. What are the tax implications?
19. Whether TDS will be applicable?
20. Who will do the KYC?
21. When will customers be issued securities?
22. Where can investors get the application form?
Fixed rate 1.5% per annum
Interest rate (Compounding rate)