Ref.No.IDMD/2479/08.02.033/2009-10 December 4, 2009

Government of India have offered to sell (re-issue) of  (a) “7.32 percent  Government Stock 2014 ” for a notified amount of Rs.3,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(1)-W&M/2009 dated December 4, 2009, (b) “6.35 percent Government Stock 2020” for a notified amount of Rs. 4,000 crore (nominal)

through a price based auction using uniform price method vide Notification No.4(1)-W&M/2009(i) dated December 4, 2009 and (c) “8.24 percent Government Stock 2027” for a notified amount of Rs. 3,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(1)-W&M/2009(ii) dated December 4, 2009. The Reserve Bank of India at Mumbai will conduct the auctions on December 11, 2009. The salient features of the auctions and the terms and conditions governing the issue of the Stocks are given in the Notifications (copies enclosed), which should be read along with the General Notification F. No.  4 (13)–W&M/2008, dated October 8, 2008 issued by Government of India.

2. We wish to draw your attention, in particular, to the following:

(i) The Stocks will be issued for a minimum amount of Rs.10,000/- (nominal) and in multiples of Rs.10,000/- thereafter.

(ii) In all the auctions, Government Stock up to 5% of the notified amount of sale will be allotted to the eligible individuals and institutions under the Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities (enclosed with the notifications F. No.4 (1)-W&M/2009, F. No.4 (1)-W&M/2009(i) and F. No.4 (1)-W&M/2009(ii) all dated December 4, 2009). Each bank or PD on the basis of firm orders received from their constituents will submit a single consolidated non-competitive bid on behalf of all its constituents in electronic format on the Negotiated Dealing System (NDS).  Allotment under the non-competitive segment to the bank or PD will be at the cut-off price that will emerge in the auction on the basis of the competitive bidding.

(iii) Both competitive and non-competitive bids for the auction should be submitted in electronic format on the Negotiated Dealing System (NDS) on December 11, 2009. Bids in physical form will not be accepted except in extraordinary circumstances such as general failure of the NDS system. 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 12.30 p.m.

(iv) An investor can submit more than one competitive bids at different prices in electronic format on the Negotiated Dealing System (NDS). However, the aggregate amount of bids submitted by a person in an auction should not exceed the notified amount of auction.

(v) On the basis of bids received, the Reserve Bank will determine the minimum price up to which tenders for purchase of Government Stock will be accepted at the auctions. Bids quoted at rates lower than the minimum price determined by the Reserve Bank of India will be rejected. Reserve Bank of India will have the full discretion to accept or reject any or all bids either wholly or partially without assigning any reason.

(vi) The result of the auctions will be announced on December 11, 2009 and payment by successful bidders will be on December 14, 2009 (Monday).

(vii) The Government Stocks will be issued by credit to Subsidiary General Ledger Account (SGL) of parties maintaining such account with Reserve Bank of India or in the form of Stock Certificate. Interest on the Government Stock will be paid half-yearly.

(viii) The Government Stocks will be repaid at par on October 20, 2014, January 2, 2020 and February 15, 2027, respectively.

(ix) The Stocks will qualify for the ready forward facility.

(x) The Stock will be eligible for “When Issued” trading during the period December 7-11, 2009 in accordance with the guidelines on ‘When Issued’ transactions in Central Government Securities’ issued by the Reserve Bank of India vide circular No. RBI /2006-07/178 dated November 16, 2006 as amended from time to time.

Yours faithfully,

(Rajendra Kumar)
Deputy General Manager

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0 responses to “RBI circular on Auction of Government of India Dated Securities Dated: 4.12.2009”

  1. niraj patel says:

    The Indian debt market consists of two categories, viz., Bond market consisting of FI bonds, PSU bonds and Corporate Bonds / debentures and Government securities market consisting of Central Govt and State Govt securities. The tradable debt market is around Rs 450,000 crores. It is estimated to be the third largest in Asia.
    The Indian money market is relatively pure competitively due to its impersonal character. Demand supply interplay eliminates the difference in asset pricing. The market rates are different depending on the issuer of the instruments-highest for corporates, at par for PSUs and fewer coupons for FIs. In money markets there are three streams of cash flows- one, the coupon interest, second, the difference in price of purchase of the bond and the redemption value, and the third, interest earned on reinvestment of interest during the tenure of the bond.

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