Non-Competitive Bidding

Auction of Government of India Floating Rate Bonds, 2014

The Government of India have offered to sell Floating Rate Bonds of 11-year tenure for a notified amount of Rs 5,000 crore (nominal) by auction. The auction will be conducted by the Reserve Bank of India, Mumbai Office, Fort, Mumbai on Monday, May 19, 2003. The Floating Rate Bonds will be issued at par (i.e. at Rs 100.00 per cent) for a minimum amount of Rs 10,000/- (face value) and in multiples of Rs 10,000/- thereafter.

The bonds will carry an interest rate which is calculated by adding a 'spread' to a variable base rate. The 'spread' will be decided in the auction by the Reserve Bank of India, and will remain unchanged during the currency of the bonds. The variable base rate will be the average rate of the implicit yields at cut-off prices emerging in the immediate previous three auctions of ‘Government of India 364 Day Treasury Bills’ held prior to the relative annual coupon reset period. The interest will be paid every half year. The base rate for calculation of interest for the first coupon period commencing from May 20, 2003 to May 19, 2004 as per the aforesaid formula, is 4.95 per cent. The base rate for the subsequent annual coupon periods, worked out as per the aforesaid formula, will be announced by the Reserve Bank of India on or before the commencement of respective coupon period. The implicit yield will be computed by reckoning 364 days in a year. Interest will be paid on half yearly basis. There will be no floor or cap on the interest rate on the Floating Rate Bonds.

In the unlikely event of 364-day Treasury Bill auctions being discontinued during the currency of the FRB, the applicable variable base rate will be the average of the Yield to Maturity (YTM) rate prevailing for one year Government of India Security as on last three reporting Fridays prior to the commencement of the relative annual coupon period worked out in consultation with the Fixed Income Money Market and Derivatives Association of India (FIMMDA). In case particular Friday/s is/are holiday/s, the yield to maturity rates on the previous working day shall be taken. This rate will be announced by RBI on or before the commencement of the relative annual coupon period.

The bonds provide hedge against interest rate risk, offering returns linked to short term yield. The Bonds will be governed by the provisions of the Public Debt Act, 1944 and the rules framed there-under. The bonds will be eligible for ready forward facility.

Interested persons may submit bids in the prescribed form obtainable from the Regional Director, RBI, Public Debt Office, Fort, Mumbai on May 19, 2003 in sealed cover superscribed "Tender for Government of India Floating Rate Bonds, 2014 - Auction dated May 19, 2003" and deposit them in the appropriate tender box at RBI, Mumbai Office, Fort, Mumbai. The competitive bids by the NDS members should be submitted only in electronic format using NDS while all the non-competitive bids should be submitted in the prescribed physical form. All bids should be submitted by 12.30 P.M. The spread (on the base rate) expected by the bidder should be expressed up to two decimal places in the bids. On the basis of bids received, RBI will determine the maximum spread, at which offers will be accepted. An investor can submit more than one bid at different 'spreads', but separate application should be submitted for each bid. The aggregate amount of bids submitted by a person in any auction should not exceed the notified amount.

The auction will be conducted by using the Uniform Price Method. Bids offered up to and including the maximum spread as determined by the Reserve Bank of India will be accepted. Bids quoted at spreads higher than the spread so determined by the Reserve Bank of India will be rejected. The results of the auction will be displayed at RBI, Mumbai Office, Fort, Mumbai on May 19, 2003. Successful bidders should deposit with that Office the price amount of bonds covered by their successful bids on May 20, 2003 before 2.30 p.m. in cash or by cheque on their account with RBI, Mumbai or by Banker's Pay Order. The bonds will be issued on May 20, 2003 and repaid at par on May 20, 2014.

For further details, Government of India Notifications No 4(8) -W&M/2003 dated May 14, 2003, 2003 may be seen.

Attention Retail Investors*
(* PFs, Trusts, RRBs, Cooperative Banks, NBFCs, Corporates, HUFs and Individuals)