Dear All,

Inflation Indexed Bonds (IIBs) Scheme – 2013-14

(The total issuance size of Inflation Indexed Bonds (IIBs) would be for about Rs. 12,000- 15,000 crore in 2013-14 and each tranche of IIBs will be for Rs. 1,000- 2000 crore)

With the view to protect savings of poor and middle classes from inflation and incentivise household sector to save in financial instruments rather than buy gold, the Reserve Bank of India in consultation with Government of India, has decided to launch Inflation Indexed Bonds (IIBs) as announced in the Union Budget for 2013-14.

For appropriate price discovery and market development, it is however, necessary to issue comparable instruments through auctions to the institutional investors such as Pension Funds, Insurance, and Mutual Funds etc. This will create demand for IIBs and help in making them tradable in the secondary market. It is therefore proposed to issue initial series for all categories of investors including institutional investors and, later, another series, exclusively for retail investors. First series of IIBs would be issued in first half of the current financial year. To target greater retail participation for this series also, it has been decided to enhance the non-competitive segment for retail and mid-segment investors to 20% from the present level of 5% applicable to auction of usual GoI securities.

Inflation Indexed Bonds (IIBs) will be having a fixed real coupon rate and a nominal principal value that is adjusted against inflation. The issuance of IIBs would target various points of the maturity curve in order to have benchmarks and to begin with, these bonds will be issued for tenor of 10 years. The total issuance size of Inflation Indexed Bonds (IIBs) would be for about Rs. 12,000-15,000 crore in 2013-14 and each tranche of IIBs will be for Rs. 1,000-2000 crore. First tranche will be issued on June 4th 2013 and the same would be issued regularly through auctions on the last Tuesday of each subsequent month during 2013-14.

Warm regards,

Dr. S P Sharma

Chief Economist

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PHD Research Bureau

PHD Chamber of Commerce and Industry

August Kranti Marg, New Delhi – 110016

Tel 91 11 49545454, Fax 91 11 26855450

E mail – research@phdcci.in

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