Saturday, Dec 02, 2023

RBI Announces Auction Of Three Govt Securities With Yields of 7.06-7.36%

RBI Announces Auction Of Three Govt Securities With Yields of 7.06-7.36%

RBI said buyers must submit the bids in the electronic format for both competitive and non-competitive bids on its Core Banking Solution (E-Kuber) system by May 4, Thursday

The Reserve Bank of India (RBI) has announced auction of three government securities maturing in 2028, 2033, and 2052, with indicative yields of 7.06%, 7.26%, and 7.36%, respectively.

The government expects to raise Rs 33,000 crore from the auction. RBI said the government will have the option to retain additional subscription up to Rs 2,000 crore against each security.

In its circular, the central bank said the securities would be sold through RBI’s Mumbai office. The securities will mature on April 10, 2028, February 6, 2033, and September 12, 2052.

The Auction Process

RBI will use the uniform price method for the auction. Further, buyers must submit bids in the electronic format for both competitive and non-competitive bids on RBI’s Core Banking Solution (E-Kuber) system by May 4, Thursday.

For non-competitive bids, the bid submission time is between 10.30 am and 11.00 am, and for competitive bids, it is between 10.30 am and 11.30 am. The results will be announced on the same day. After that, successful bidders can make the payment on May 8.

Furthermore, RBI said the ‘primary dealers’ can submit bids for the additional competitive underwriting (ACU) portion by 9:30 am on May 4 on RBI’s E-Kuber system.

Auction Type

RBI said that for multiple price-based auctions, successful bids will be accepted at the respective quoted yield. For uniform price-based auction, bids will be accepted as per the cut off yield.  

Also, for new security, the auction will be yield-based, and for securities re-issued, it will be price-based. In the case of floating rate bonds (FRB), the auction will be spread-based for new security and price-based for securities reissued. RBI said the stocks would be issued for a minimum amount of Rs 10,000, and after that, in multiples of Rs 10,000.

In all the auctions, RBI said, the government stock up to 5 per cent of the notified sale amount will be allotted to eligible individuals and institutions under the scheme for non-competitive bidding facility. Individual investors can also place bids through RBI’s Retail Direct portal.

RBI said that barring “extraordinary” circumstances, bids in physical form will not be accepted.  

In addition, investors can submit more than one competitive bid in electronic format. However, the aggregate amount of bids in an auction should not exceed the notified auction amount.

RBI To Decide Yield

RBI will determine the minimum and maximum yields based on the bids received, or up to which the tenders for government stock purchase are accepted at the auctions.

Also, RBI would reject the bids quoted lower than its minimum or higher yields for the securities. RBI said it “will have the full discretion to accept or reject any or all bids either wholly or partially without assigning any reason”. The successful bidders will receive the securities in the form of stock certificate.

The central bank said: “Interest on the government stock will be paid half-yearly other than in case of securities with non-standard maturities.” Additionally, the stocks will be eligible for repurchase transactions (Repo) as per the conditions laid down by RBI. In the case of non-residents, investments will be subject to government guidelines and RBI rules.