Non-Competitive Bidding

To encourage greater and easier participation of small and medium investors in Government Securities (G-Secs), the Government has decided to let these investors buy G-Secs under a non-competitive bidding scheme.

Ans. Government of India issues securities (Government bonds or G-Secs as popularly known) , in order to borrow money from the market. The tenure of G-Secs ranges from one year to twenty-five years. The coupon rate of G-Secs is decided in an auction. The government notifies a date on which it will auction a certain security to borrow a specified amount. The auctions are conducted by the RBI. Any person can submit bids in the auction.

Ans. The G-Secs offer safety and security, allow the investor to lock-in investments for attractive returns over a longer duration, and they can be readily sold. Interest earned on G-Secs upto Rs.3000/- is specifically exempted from income tax(Sec. 80L of IT Act). In addition, there is no TDS.

Ans. The new scheme enables small and medium investors to purchase G-Secs in the auction on a non-competitive basis. Small and medium investors include provident funds, trusts, regional rural banks, urban co-operative banks, non-banking financial companies, corporate bodies, Hindu Undivided Families and also individuals. The investor can participate in the G-Secs auction by giving a simple application to a bank or a primary dealer without having to quote price or rate of interest.

Ans. Each investor can put in a single bid amounting to a minimum of Rs. 10,000 and a maximum of Rs. One crore.

Ans. Yes, all retail investors taken together will be allotted G-Secs upto a maximum of 5% of the notified amount.For instance, if the auction of G-Secs is for Rs. 5000 crore, the amount for non-competitive bidders will be Rs.250 crore. If non-competitive bids are more than this amount, all the non-competitive bidders will get proportionate allotment.

Ans. The allotment on non-competitive basis will be done at the weighted average rate that will emerge in the auction.