The Government of India has announced the sale (re-issue) of three government securities with different tenures through price-based auctions. This article will cover the details of the auction, including the securities’ interest rates, the notified amounts, and the bidding process.
Table of Contents
Overview
The Indian government has announced the sale (re-issue) of three government securities with the following details:
- “7.06% Government Security 2028” for a notified amount of Rs 8,000 crore (nominal) through price-based auction using the uniform price method.
- “7.26% Government Security 2033” for a notified amount of Rs 14,000 crore (nominal) through price-based auction using the uniform price method.
- “7.36% Government Security 2052” for a notified amount of Rs 11,000 crore (nominal) through price-based auction using the multiple price method.
The auctions will be conducted by the Reserve Bank of India (RBI), Mumbai Office, Fort, Mumbai on May 04, 2023 (Thursday).
Bidding Process
The bidding process for the auction will be conducted in electronic format on the RBI Core Banking Solution (E-Kuber) system on May 04, 2023. Both competitive and non-competitive bids for the auction should be submitted in electronic format.
The non-competitive bids should be submitted between 10:30 a.m. and 11:00 a.m., while the competitive bids should be submitted between 10:30 a.m. and 11:30 a.m.
Eligibility for Non-Competitive Bidding Facility
Up to 5% of the notified amount of the sale of the securities will be allotted to eligible individuals and institutions as per the Scheme for Non-Competitive Bidding Facility in the Auction of Government Securities.
Additional Subscription
The Government of India will have the option to retain additional subscription up to Rs. 2,000 crore against each security mentioned above.
Result and Payment
The result of the auctions will be announced on May 04, 2023 (Thursday), and payment by successful bidders will be on May 08, 2023 (Monday).
When Issued Trading
The Securities will be eligible for “When Issued” trading in accordance with the guidelines on ‘When Issued transactions in Central Government Securities’ issued by the Reserve Bank of India vide circular No. RBI/2018-19/25 dated July 24, 2018 as amended from time to time.
Why is the Indian Government Selling these Securities?
The Indian government is selling these securities to fund its operations and repay its outstanding debt. The government securities market is an important source of funds for the government, and the interest rates on these securities reflect the government’s creditworthiness.
What are Government Securities?
Government securities are debt instruments issued by the central or state government to fund their fiscal deficits. These securities have different tenures and carry fixed or floating interest rates.
What is a Price-Based Auction?
In a price-based auction, the securities are sold at a price determined by the auction. The bidders bid the price at which they are willing to buy the securities, and the auction determines the price at which the securities will be sold.
What is a Uniform Price Method?
In a uniform price method auction, all the successful bidders pay the same price, which is the lowest accepted bid price.
What is a Multiple Price Method?
The multiple price method is a process used by the Reserve Bank of India (RBI) for conducting auctions of government securities. Under this method, the bids are accepted at different prices, and the securities are allotted to successful bidders at the price they have quoted in their bid. This is in contrast to the uniform price method, where all successful bidders are allotted securities at the same price. The multiple price method allows for more efficient price discovery as it considers the bids at different prices, thus enabling the market to determine the most competitive price for the securities.
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