RBI/2016-17/105
Ref. No. IDMD/986 /08.02.032/2016-17
November
01, 2016
All Scheduled Commercial Banks
All State Co-operative Banks/All Scheduled Primary
(Urban) Co-operative Banks /All Financial Institutions/
All Primary Dealers.
Dear Sir/Madam,
Auction
of Government of India Dated Securities
Government of India has offered
to sell (issue/re-issue) four dated securities for notified amount of ?
15,000 crore as per the following details:
Sr
No
|
Security
|
Notified
Amount (in ? crore)
|
GoI
Notification
|
Auction
Date
|
Settlement
date
|
1
|
8 Yrs. FRB 2024
|
3,000
|
4(2)-W&M/2016 dated
November 01, 2016.
|
November
04, 2016
(Friday)
|
November
07, 2016 (Monday)
|
2
|
7.61% GS 2030
|
7,000
|
4(2)-W&M/2016(i) dated
November 01, 2016.
|
3
|
7.50% GS 2034
|
2,000
|
4(2)-W&M/2016(ii) dated
November 01, 2016
|
4
|
7.06 GS 2046
|
3,000
|
4(2)-W&M/2016(iii) dated
November 01, 2016.
|
|
Total
|
15,000
|
|
|
|
The auction for securities will
be price based using multiple price method. The Reserve Bank of India at Mumbai will conduct
the auctions. 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:
A. With regard to Floating Rate
Bonds (FRBs)
i. The bonds will carry a
variable interest rate to be computed by taking the average of the implicit
yields at cut-off prices of last three auctions of Government of India 182
day Treasury Bills. The reset and payment of variable interest will be made
on a semi-annual basis.
ii. The implicit yield will be computed
by reckoning 365-day year.
iii. The coupon rate for payment
of interest, as per the aforesaid formula for the first half year ending
May 07, 2017 will be 6.51 per cent. (Please see
enclosed illustration)
iv. The variable coupon rate for
the subsequent semi-annual periods, to be worked out as per the aforesaid
formula, will be announced by RBI on or before the commencement of the
relative coupon periods.
v. 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.
vi. 'Floating Rate Bonds 2024'
will be repaid at par on November 07, 2024.
vii. There will be no floor or
cap for the interest rate on the Floating Rate Bonds.
B. In all the cases
(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. 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 Reserve Bank of India Core Banking Solution (E-Kuber) system.
Allotment under the non-competitive segment to the bank or PD will be at
the weighted average rate of yield/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 Reserve Bank of India Core Banking Solution (E-Kuber) system
on November 04, 2016. Bids in physical form will not be accepted except in
extraordinary circumstances. 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.
(iv) An investor can submit more
than one competitive bid at different prices in electronic format on the
Reserve Bank of India Core Banking Solution (E-Kuber) system. 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 November
04, 2016 and payment by successful
bidders will be on November
07, 2016. (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 November
07, 2024; May 09, 2030; August 10, 2034, and October 10, 2046 respectively.
(ix) The Stocks will qualify for
the ready forward facility.
(x) The Stocks will be eligible
for “When Issued” trading during the period November 02-November 04, 2016. in accordance with guidelines on ‘When Issued’
transactions in Central Government Securities issued by Reserve Bank of
India vide circular No.RBI /2006-07/178 dated
November 16, 2006 as amended from time to time.
Yours
faithfully
(Chandan
Kumar)
General Manager
Illustration:
Rate of interest payable on Floating Rate Bonds 2024
Calculation of variable coupon
rate applicable for the half Year ending May 07, 2017
S.No.
|
Date
of auction
|
Cutoff
price
|
Implicit
yield at cut off price
|
1
|
Sep 21, 2016
|
96.80
|
6.6297
|
2
|
Oct 05,2016
|
96.89
|
6.4373
|
3
|
Oct 19, 2016
|
96.88
|
6.4587
|
Total
|
19.5257
|
@ annualized for 365 day year
Variable Coupon Rate = (19.5257
/ 3) = 6.5086
Rounded off to two decimal
places = 6.51
Interest rate applicable for the
year
(November 07, 2016 to May 06,
2017) = 6.51 per cent per annum
|