Participants from Internal Debt Management Department, RBI
Shri. R. Gandhi, Executive Director
Shri K.K. Vohra, PCGM
Shri. Rajendra Kumar, DGM
Shri Sunil Kumar, AA

Shri N.S. Venkatesh, Chairman FIMMDA
Shri C.E.S. Azariah, CEO FIMMDA

Moderator:
Ms. Alpana Killawala – Chief General Manager, Department of Communication

Ladies and gentlemen, good day and welcome to the Reserve Bank of India’s Teleconference on Inflation-Indexed Bonds. As a reminder, for the duration of this conference, all participants’ lines will be in the listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. Should you need assistance during this conference, please signal an operator by pressing ‘*’ and then 0 on your touchtone telephone. Please note that this conference is being recorded. At this time, I would like to hand the conference over to Ms. Alpana Killawala. Thank you. And over to you ma'am.

Thank you, Inba. Welcome to this conference of inflation-indexed bonds. Given the interest in the bonds, we have converted our scheduled meeting with market participants through this teleconference so that we can reach wider. Apart from the invited market participants, we have on our side today the Executive Director -- Mr. R. Gandhi and his team. In this 1-hour telecon, there will be a brief introduction of the subject and then questions to be asked first by market participants, and if time permits also by media. Over to you Gandhi saab.

Thank you, Alpana. Good afternoon, everybody. Reserve Bank in consultation with the Government of India has for quite some time been working on introduction of new type of instruments for market borrowings by the central government. So one of the themes that we have been working on is inflation-indexed bonds. In the recent budget, the finance minister finally announced about introduction of that during the current fiscal year, and accordingly, we have devised a set of terms for the issuance. So I would request my colleague, Mr. Rajendra to give a brief about the terms, and thereafter we will take questions from those who are present here and also who are waiting at the end of the phone.

Thank you. Giving the details of the product feature of this IIBs, the IIBs will be having fixed real coupon rate and a nominal (Inaudible) 2:23 that will be listed against inflation. The coupon payments will be paid on the adjusted principal so that these bonds (Inaudible) as per the users. At maturity, the adjusted principal for the face value whichever is higher will be paid to the investor. The index ratio will be computed by dividing the rate of index for the settlement date by rate of index for the issue date. We have used the final wholesale price in session as inflation measures of this. The indexation will be done with final WPI and we have given 4 months’ lag because of unavailability of the final WPI. The bonds will be issued by auction. In order to promote retail participation, the non competitive bidding portion is increased from 5% as per the extract scheme up to 20% of the notified amount. The bonds will be issued for tenure of 10 years. Issuance size of each tranche of this IIB will be to the tune of Rs. 1,000 crores to Rs.2,000 crores and the total issuance during the fiscal year would be to the tune of Rs. 12,000 crore to 15,000 crore. We propose to issue the first tranche of inflation-indexed bond on 4th of June 2013, and subsequently there will be a regular issuance through auctions on the last Tuesday of each month, including the last Tuesday of June. For all practical purposes, the IIB will be like a government security. Thank you.

We will begin the questions in the room.

Can you update on the IIB that is (Inaudible) 4:21 a lot of time discussion about the issue, I think that much discussions within the market participants we have come out with the….. Essentially, the initial thoughts were that whether the size would be large but now we understand that it is around Rs. 1,000 to Rs. 2,000 crores issues. So in pragmatic sense, we believe that there could be another (Inaudible) for this particular bond. Having said that the valuation of the bonds is going to be one of the key issues where (Inaudible) 4:58 market rate has to happen. We at FIMMDA are also looking at how do we come out with the valuation curve based on the inflation expectations may be falling sort of thing? But if trade happens, definitely we are quite happy that based on the trade (Inaudible) but the trades are not happening, then maybe we like to have sort of holding sort of the inflation. We are working on that, we will come out on that model also on that. Essentially, we believe that time has come for the inflation bonds for the simple reason that it gives the US rate of return protecting from the vagaries of inflation not only on its income but also on its structure on fixed loans. We also believe that the better instruments that has been designed compared to ‘97 when the capital index bonds was there, where only the capital was have been protected. We have to look at from our (Inaudible) 6:08 that we have raised is essentially out of the interest taxation benefits, sort of things will come, in the sense where the redemption premium that we get on the final sort of nominal value based on the inflation assets how does the capital rate adjusted. If it is a real return, whether are we going to get taxed on the real return because (Inaudible) 6:36 spread above the inflation so it comes as a nominal returns in the annual investors, the nominal return we will get. So these are the two thoughts which has come to our mind.

Next question, may I request to please introduce yourself and speak into the mic, because the other end cannot hear you?

I am Vinay CEO of FIMMDA. You have mentioned about the re-issuances of the last Tuesday of the subsequent months. So I presume that assuming all the bonds will be 10-year issue (Inaudible) and throughout 2013-14, we are going to have set of 10-year bonds.

In order to build up liquidity in the bond, we plan to issue the same bond throughout the first half, and the bond will be reissued.

That means there will be only one bond which will be there, we are continue to release (Inaudible) 8.36. As far as valuation is concerned, we are looking at during this fiscal year, valuing only one single bond.

Current and up to the half year, we will issue the reissuances. The second half year whether another 10-year needs to be issued that will be decided when the second half of the calendar will be decided.

I am Sandeep Bawla, representing___9:08 of India. One question which we face in trying to market these bonds is that, while these bonds are giving return over the boosted price index, the consumer eventually pays the CPI or that is a perception. So future rate will be looking at CPI versus stabilizes.

New instruments issued down the line in the next year and other things is perhaps once the CPI index stabilizes we may move over, but currently the charge is for WPI for the current release which is going to be issued.

I am Rajesh Agarwal from Bank of America. My question is related to the ways of success for these bonds. And one of the key requirements will be to create inflation with liabilities in the medium term which means that creating insurance policies, insurance annuities which are into inflation, creating pension schemes which are linked to inflation. Till that happens, in the short run we will need participants from banking sector to be there for the next 6 months to ensure the success of these bonds. And there are a couple of queries which have been there which was highlighted currently was related to accounting of the interest income of these bonds. The fear currently about the banking system is that the inflation accrual will be treated as a capital income and will not be accounted as an income every year which will impact the availability of these banks by bond and gold industry portfolio. That is one query we have and this may have some short term impact on the market really on these bonds?

As I mentioned that as of now the current rules relating to any instrument that has to do will apply to this also, whether it is invested by banks or it is some other concerns. There is no special dispensation as of now on IIB-related. As I said recently that representation have been received relating to this that finally Government of India will have take the decision whether a little bit some special dispensation will be there for IIB-related practice as of now.

We will keep that in mind and in the final instructions relating to the retail segment will be announced, and the clarity on this, if that is still being evolved.

Shall we ask participants Inba, if they have any questions there?

Participants in the audio conference, if you wish to ask a question, you may press * and 1 on your touchtone telephone. Participants are also requested to use only handsets while asking a question. We will take our next question from Shakti Prasad of AK Capital. Please go ahead.

The first one comes up with for the retail investor in order to participate in a non-competitive bid, what would be the normal procedure, this is the first question?

To participate in non-competitive bidding, he has to come and participate through the primary member participating in the auction, so that will be an option.

So even if that particular retail investor is participating through banks or let us say PD kind of thing, then obviously, some demat conversion would happen later in stage or otherwise it will be through CSGL kind of, I mean how it will be the transition from CSGL to demat, etc.?

Presently, there is a system of conversion between CSGL and demat accounts, so the same thing will continue. We are also looking at minimizing the time for this conversion.

So primarily it would be through CSGL and accordingly demat conversion for a retail investor to be very precise, right sir?

Yes.

The second question is the trading effect, let us say how the trading would take place, would it be through the SGL and NDAs OM and simultaneously through NAC debt market segment, the trading part would take place?

The trading part would be as it is for any normal government security.

And the last question in fact, being that adjusted principal on a particular settlement date would be considered for calculating the interest inflows till the date of, I mean, the term to maturity of that particular security in arriving the yield valuation, I mean for a particular settlement day, if I am computing the adjusted principal rate, will that adjusted principal rate would be considered for each and every subsequent forthcoming coupon interest inflow date, that would be considered, multiplied by a specific coupon rate for valuating that particular instrument?

First of all, the principal is going to get invested, will be multiplied, we have given here the index ratio for how to calculate the principal amount. Example has been worked out in RBIs near circular on capital index bonds, if you go through, you will get an idea of how that principal get (Inaudible) 16:24. Now when we do a valuation after the bond is issued, first of all see what will be the real yield, because they are going to evaluate on the real yield and not on the nominal yield. So on the day one, the bond is issued, we know very well that how it is going to get priced, they are to going to auction and there will be a coupon, when the auction cut off is announced, that coupon gets fixed.

My question, the coupon would remain say and we have the variable component as the adjusted principal?

When I have to value that bond, I will have to adjust principal, what will be that adjusted principle, then for that again we will have to go through that formula which has been given for arriving at the principal amount.

I got your point, but the thing is let us say today if I am computing the yield portion or let us say price portion, then obviously for settlement date, I am pretty much comfortable with the adjusted principal multiplied by the listed coupon rate, and to me for the subsequent coupon legs which will be accruing throughout the term-to-maturity let us say annual basis or half yearly basis in this case, then obviously next half year, what would be the adjusted principle, for that particular settlement, it would remain as the same?

In this case, for each day, we will have the index ratio, this is your bond, you have to multiply the index ratio of that particular date. We do not have to base the next coupon date, since the ratio is available for each date, so we can use that for adjusting the principal.

A clarification came from Sunil Kumar of IDMD, Reserve Bank of India.

Still not clear ma'am, it would be really of great help if you could brief us out by giving some kind of illustrations in your press release stuff, so it would really be a great help to us, anyways thank you so much.

We intend to put on a set of FAQs on our website by a particular method of calculation also with an example.

Thank you very much. We will take our next question from R. Jayachandran of Mumbai Port Trust. Please go ahead.

I have a specific question, because we are not a primary dealer, can we directly buy from RBI? We are from Mumbai Port Trust.

The people having an SGL account and settlement through CCL can presently participate through the primary auctions. Technically, yes, you can participate in the auction through fiscal relief, but it is rather inhibition way of participating in the auction. So most efficient route would be to participate through one of the primary dealers.

That was Rajendra Kumar from IDMD, RBI.

We will take our next question from Subrata Sarkar of Dalmia Securities. Please go ahead.

The question is for the retail participants, what would be the minimum and maximum participation amount in the first round?

The minimum lot of participation will be Rs. 10,000, but non-competitive bidding portion has been increased from 5% of the notified amount up to 20%. So whatever bids are there in the non-competitive portion, as per the present norms will be allotted.

No, is there any limit like Rs. 5 lakh or Rs. 10 lakh?

Minimum bidding amount is Rs. 10,000.

I am saying upper limit per individual?

There is a 2 crore limit.

There is a limit on individual participation in non-competitive bidding of Rs. 2 crores, but others buying in a secondary market or buying through a primary dealer and primary auction, there are no limits.

Our next question is from Shantanu Agarwal of Goldman Sachs. Please go ahead.

Just a small clarification, whether we will have One 22:37 issue market and underwriting commissions for this inflation linked for auction?

There will be underwriting of these bonds like normal government bond auctions. But presently there are certain technical issues because of which we will not be having When Issued. So once these are sorted out even When Issued will be starting off.

Our next question is from Arjun Shetty of Deutsche Bank. Please go ahead.

A couple of short questions; one is that you mentioned that this will be treated like any other government security, so I am assuming that they are eligible for SLR?

Yes.

You mentioned that 20% of the auction will be reserved for retail. So can retail sell to banks, I mean in the sense that it could be 20% to begin with but over time it could be entirely owned by institutions?

Yes, in the market when it is bought and sold it can move over to any institutional investors that is possible. But in the second series which we will be issuing specifically for the retail segment, there could be some restrictions. In any case, please await the product design of the other instrument down the line.

Is there a cap in floor on this instrument at all? For example, US Strips, etc., they have a floor on the coupon, is there anything in these securities?

No, there is no floor.

One related question towards the last question was, if we don’t put a floor, if there is a negative (Inaudible) 24:51 then what you would do?

Negative (Inaudible) inflation expectation, we have seen negative (Inaudible). So we will paying positive coupon and we will be adjusting price to reflect the negative (Inaudible) 25:09. So this is a possibility but we are not expecting that possibility in the Indian context.

Our next question is from Beena Shetty of Deutsche Bank. Please go ahead.

With respect to the inflation-indexed bonds, just wanted to check out whether corporate will also be allowed to issue inflation-indexed bonds because there was an article that L&T is looking at issuing an inflation-indexed bond in the month of June? And if yes, will they also be governed by the same norms as applicable to the ones which are issued by RBI?

The financial products issued by corporate that will be the prerogative of those corporates and subject to SEBIs regulations, but there will not be any requirement from our side that it has to be exactly in line with this inflation-indexed bond or it should be otherwise those questions don’t arise.

Our next question is from Rohit Arora of Barclays. Please go ahead.

My first question is, are the foreign investors also allowed to participate in inflation-indexed bonds? And if so will it fall into the usual FII quota auctions, and will the tax treatment be similar as the nominal bonds?

The FII participation will be as per the present instructions for all other government bonds, so it is exactly like the present dispensation within those limits.

My second question is you mentioned that first tranche will be issued from June to September and second after October. So will the first tranche which is the current 10-year expected benchmark, will it be discontinued after September or it may also continue to be issued?

That right now we cannot say that it will be stopped or it will be reissued that you will have to wait for the second half year calendar.

Our next question is from Vidya Bala of Fundsindia. Please go ahead.

You may have answered this earlier, but I just wish to know if it is a prerequisite for retail investors to hold to a demat account if they have to buy these bonds?

Because these will be issued at demat in form of either as Gild account or a demat account if necessary. We can hold it in fiscal form also technically but however, the emphasis is that it would be better if it is held in a demat account.

Allotment will take place in demat account in the sense that whether it is SDL account or demat account. Thereafter the individual if they would so want, they can convert into…..

Would we have these bonds across various tenures eventually, tenures which are available for the generic yield bonds?

Of course down the line that will be the assumption IRB of different tenures would be the possibility.

Is there any decision on the frequency of the payout of coupon rate?

Yes, coupon will be paid every half year.

Our next question is from Safina Sayed of Goldman Sachs. Please go ahead.

I have a question whether we can do a short sale and Repo for these bonds?

The answer is yes.

So the Repo calculation for the interest and the net pay interest calculation will be based on your inflation index factor only right?

Before Rajendra takes up answer to that regarding your short selling, RBI has laid down the norm that within the minimum amount of trades and volume and that is _____ 30.10 depends of which are the ones which are liquid enough to be short end. We don’t want the market participant to be caught in the liquid instruments on the shorter rate and enable to square up the position so I think that will continue for the inflation index bond also as per the Indian Law.

As Mr. Azariah has told, whatever project norms are there for G-Secs will apply for the IIBs also, but yes the norms for that liquid and liquid secure is also there and that makes an issues of credit portion.

Our next question is from Adrish Kulali of HDFC. Please go ahead.

In the weeks when you have the inflation index pool issuances, will the issuance be concrete part of that week’s schedule borrowing amount or will it be in addition to the scheduled borrowing amount?

If IIBs will be in addition to the ones which we have already announced for that half year. Just a clarification here.

The additions for IIB in under the market borrowing program of Government of India and is part of our calendar. So we have a weekly issue of calendar that part of the weekly issues calendar.

In fact we have already issued first half calendar for the government borrowings for Friday options. What we have announced for IIPs Rs. 12,000 to Rs. 15,000 is part of the annual government bond program, but over and above the half yearly calendar which we have already announced which means now Rs. 1000 to Rs. 2000 per month which we are going to raise, that is the part of the overall borrowing program. So what you have been told in that every Friday whatever we will be raising is like the small amount like once in a month like 1000 or 2000 and as you know that is above Rs. 15000 every week, so it is like that, so whatever calendar we have announced this is like above that but annual borrowing program is the part of that.

The next question is from Nilesh Todaiya of JP Morgan. Please go ahead.

We just wanted to check that the auction procedure for IIBs will remain same as that for government securities on _____33.13 platform?

Yes, it will be the same, but now the investors will be bidding on a real yield they are expected in yield based auction and on real price if it is price based auction, but otherwise the bidding process is the same.

Could you kindly repeat that?

The bidding process is the same of which the investors will be bidding on real yield if it is yield based auction and on real price if it is price based auction.

The other thing that we wanted to confirm I think got clarified that a foreign institutional investors will be allowed to participate in this bond, the way under their current government securities limits, so that has already got clarified.

I just wanted to confirm** what is timeline that you have in mind with respect to the issuance of these bonds. Is there any time line beyond which you would not want to issue after financial savings have become or have restored themselves back at the trajectory at which you want them or we are going to issue IIBs forever?

IIBs will be part of the annual calendar, so it will be decided every year when the market borrowing programs of the government is…..

Yes that is correct.

Most of the doubts have been clarified, but I just want to ask you if the detail terms of the bond settlement, pricing, accrual, etc., will be in line with the December 2010 technical paper?

Not exactly.

It will be laid on real price basis that is build up the real view you will arrive at the real price and the secondary market trading on these bond will happen on that price. The settlement considerations will, however, be indexed. This will be inflation adjusted based on the index ratio applicable on the settlement deed.

Are there any plans to rope in or retaining agency for introducing an appropriate benchmark for these kind of instruments?

There are no such plans.

What I am not very clear from the circular is that, what will be the frequency of the index ratios will be or is it changed?

Will it be monthly thing or how is it?

The WPI index we are using monthly final WPI and that final WPI is basically used as the reference for the first of the calendar month like 4 months, December final WPI will be used as a reference WPI from 1st of May and January final WPI will be used as a reference WPI for 1st of June and inflation dates between 1st May and 1st June will be using the interpolation number to calculate that the first of WPI and that will be use for calculating the index ratio.

We can safely assume that there will be 4 or 5 index changes, in between the two coupon dates?

It will be 6.

We It will be 6 right every month?

Yes, 6 monthly numbers, yes.

I think once the FAQs are published, which will give me more clarity, thank you.

Our next question is from Ankit Jadeja of DBS. Please go ahead.

This is regarding valuation, just a small question. As this is being issued as any other government security, in case it is liquid and it is not traded on India so like it happened in the floater bonds earlier, would FIMMDA be giving a theoretical price at the end of the day and will they have a valuation as to how they give that price?

From FIMMDA, definitely, we will have a model price because the way the model is auctioned, that itself will let you know that it is all dependent upon the real yield. So on a daily basis, first thing is which we will be valuing is even on the real yield on a day. The only problem is because the inflation number is going to come only once in a month, perhaps there we may have to have some polling on a daily basis, or a weekly basis depending upon what the market participants want, and how to calculate the real yield, in the sense that they will have to then poll by what is their expected inflation number. The nominal yield we will know these are the markets which is trading, it is a 10-year for their issuing. And the 10-year G-Sec also has been issued now, there should not be any problem in the nominal yield. Calculating really, you need the inflation number. So we are working on that, most probably by next week we should get an idea of what the model looks like. We already have a model for valuing the floating rates G-Sec. Similar sort of a model will be there. We will be informing the market participants and we are having evaluation committee meeting once we finalize how to value on a daily basis.

So in case the bond is not traded in India we will have a theoretical price coming from FIMMDA at the end of the day?

Yeah, you will have.

Thank you. The next question is from Nidhi Sharma from ING. Please go ahead.

This is Ashish on behalf of Nidhi. Can you please reiterate the comments on the impact on half yearly and annual borrowing? You said there will be no impact on the annual borrowings, right?

So the overall annual borrowing remains the same, it will be incorporated in the second half at least?

Overall annual borrowing for the current year, the overall quantum remain the same within which only this 15,000 that IIBs will be only accounted for, yes.

Thank you. The next question is from Aditya Vyas of IDFC. Please go ahead.

Just to seek a clarification on corporates not allowed to invest below the bank rate. So in case the nominal yield after bidding comes below bank rate, how will it be?

I think this is a company-backed provision, investment. So I think it is Government of India issue, it is a regulatory issue.

But in case of corporates, how will it be if the corporate is an issuer?

No, that is you are thinking about if and when the corporate would issue and inflation debenture kind of, right?

Yeah.

That they will have to factor in how the other regulatory requirements, we will not be able to say anything on that.

But as far as G-Sec is concerned, it would not really matter?

Their investment in G-Sec?

My question is basically if the nominal yield is below the bank rate, because there is a regulation which basically avoids or rather stops corporates from investing below the bank rate.

Venkatesh here, Chairman FIMMDA. As far as I understand, it is related to Sec.370 of the Companies Act, 1956, it actually talks about the index corporate investments, it does not talk about an investment into government security. If you see even now the government securities which are trading, let us say 10-year long term that will be trading at around 7.43% sort of rate, the corporates are investing. This particular thing is applicable in the corporate investments, it does not have anything to do with Government of India security. Like government security only, SLR security only, there is no issue on this.

Thank you. The next question is from Sachin Tiwani of L&T. Please go ahead.

This is Alif from L&T instead of Sachin. One question on WPI. In case I think the base year changes there will be some linking factor, what is the composition of WPI also changes, what numbers we did?

Sunil Kumar from IDMD. I think that will be very difficult to, we will have to go by whatever is a basket of, basically we cannot recoup the debt.

I am Mariya from RBI. Whenever the series of new index comes there will linking factor will….so may be that linking factor would be used here also. For all the WPI core series, linking factor is always be….

But my question is more about the composition of WPI.

Suppose, the new series come to the basket and there was a change, the new commodities comes so pre-change in WPI, the basket is always going to change. So linking factor is always written on.

Another question, how would you price the bonds for the Indian participants? Would it be the same price as is arrived at after the bidding in the competitive portion?

Your question is relating to the retail issues?

Please wait for our complete design of the instruments which will be announced in next few months. So at the time this point will also be clarified.

Currently, 5% has been increased to 20%. That is based on weighted average price. So, in the coming auction also on 4th June whatever this category implies are non-competitive, the same rules will apply which are applicable for non-competitive bidding in the fixed rate.

Thank you. The next question is from Monish Vanjara of Goldman Sachs. Please go ahead.

My question is the RBI circular for bonds MT which say that although the valuation is to be done as per FIMMDA, the accounting is to be done as per lower cost or market value. So for IIBs, would there be a requirement to compare the cost, when the security was purchased with the current market price published by FIMMDA and the lower of the two would then be multiplied by the index ratio?

Yes, exactly, that is how it has to be done as far as accounting is concerned.

Thank you. The next question is from the line of Shiva Chandrashekar of Goldman Sachs. Please go ahead.

May I know when we expect FAQ to be available? And would it throw more light on illustrations and FIMMDA’s valuation in case the bond is not traded on any particular day?

FAQs we intend to place by this week end.

FIMMDA valuation related in another 10 days.

Thank you. The next question is from Tanmay Vora of SBI. Please go ahead.

I just wanted to understand that in India, there is no proper indicator available to retail investor about what could be the real yield for a country like India, because we have two kind of indexes which we follow; one is that Wholesale Price Index and the other is Consumer Price Index. So in such a scenario, can you give us a sense on what could be the pricing or what could be the price band which the real yield should be bid?

That will be for the market participants to decide at what price would like to buy the bonds. From Reserve Bank side, we will not be able to give any guidance on that.

Rajesh here from Bank of America. There was a paper on the RBI website sometime March end, which spoke about the interest rate, maybe you can afford to that paper.

Thank you. The next question is from the line of Parnika Sokhi of DNA. Please go ahead.

Basically, just want to know why would not there be a special tax treatment to these instruments, because they might have in engaging more of retail participation?

The tax related matters, government would be very sensitive 50.56 issues, in the sense that is certain representations have come, but currently, there is no special dispensation as I mentioned earlier.

In future, any plans to establish a separate secondary market for these instruments?

There is no separate secondary market. Normal secondary market at India Zone platform and if in exchanges that segment, that is already available, they say these instruments can also be traded therein.

Thank you. The next question is from Tim F of Bloomberg. Please go ahead.

My question is about WPI capital ratio. Assuming today June 4th which is the issue date of the instrument, I am wondering what would be the WPI use for calculation of the referent WPI on June 4th? Is it WPI from February and January?

Sunil Kumar from IDMD. Yeah, you are right, since we have taken 4 months lag in final WPI and January final WPI will be taken as a reference WPI on 1st of June and February final WPI will be taken as a reference WPI from 1st of July, for 4th June we will be using the interpolate in monthly…. and we will calculate the reference WPI.

But for June 4th, the reference of WPI board, so it would be from WPI March or February and April?

Can I expect to see the full illustration in…

I think we will give this.

Just to add, this formula is in the technical paper on December 2010 if you want to refer, you can refer to that; however, we will give that in FAQ as well.

Thank you. The next question is from Rama Krishnan of Bloomberg. Please go ahead.

Just want to clarify, the settlement will be T+1 or T+2?

Settlement will be T+1.

Thank you. The next question is from Lisa Barbora of Mint. Please go ahead.

My question was regarding for retail investors. Is there any special vehicle that you envisage because even right now for government securities they go through the mutual fund route really to get access to that. So is there a special vehicle envisage for retail investors to access this kind of bond or will they have to contact dealers directly?

T-Bill bonds for the current issue when they participate along with a non-competitive bid, they have already answered that they may have to approach through the PDs and when special T-Bill bonds when it comes for targeting the retail investors, the full detail will be available in a few months time before we start in October.

Another question, for subsequent calculation of adjusted principal, which you will adjust as per the inflation WPI in the index ratio, so will you take the base as the previous adjusted principal or will you take the base as the face value of the bond?

It means the face value of the bond and it will be multiplied in the index ratio on that particular day.

So for every calculation of adjusted principal, you will take the face value of the bond and then calculate, not the previous adjusted principal, right?

Yes.

Can we have one last question, Inba?

Just a quick one, wanted to check, retail participation, do you all plan to sell it through post offices, banks later on for the retail? And if that is the case, is it not allowing them to making DEMAT account mandatory thing will be a deterrent, lots of us do not have DEMAT account so?

For execution of the retail investors, we are working out all the methodologies. We will come out with more details by the time we complete the design.

But is there a plan to sell it through post offices, banks?

The logistics relating to that have to be tied up before we announce. So we are working on it. We will have clarity before we announce the product.

But as of now we will have to have a DEMAT account to invest, right for retail guys?

For the current issuances in the first half, the individual will have to have a DEMAT account or CSGL account.

Thank you. I would now like to hand the floor back to Ms. Alpana Killawala for closing comments?

Thank you very much all of you for present here in this room and those who have joined in through the teleconference. We do hope that you found this conference useful. If there are any questions which have remained unanswered, we request you to e-mail them to an e-mail address, cgmidmd@rbi.org.in. We will try and answer them in the FAQs that we are releasing towards the week end. The audio of this call will be available on the RBI website in about half an hour. Thank you.

Thank you. Ladies and gentlemen that concludes this conference call of Reserve Bank of India. Thank you for joining us and you may now disconnect your lines.