The
Reserve Bank of India (RBI) launched an inflation indexed saving bonds on 23
December 2013. The newly launched indexed savings bonds offer protection to
retail investors from price rise. It will be open for subscription between 23
to 31 December.
These securities
were launched in the backdrop of announcement made in the Union Budget 2013-14 to
introduce instruments that will protect savings from
inflation, especially the savings of the poor and middle classes.
The minimum limit for investment onthe indexed saving
bonds is 5000 rupees and maximum is 5 lakh rupees per annum.
Interest rate on
these securities would be linked to final combined Consumer Price Index (CPI)
Interest rate would comprise two parts – fixed rate (1.5%) and inflation rate
based on CPI and the same will be compounded in the
principal on half-yearly basis and paid at the time of maturity.
Early
redemptions would be allowed after one year from the date of issue for senior
citizens (i.e. above65
years of age) and 3 years for all others, subject to penalty charges at the
rate of 50% of the last coupon payable for early redemption. Early redemptions,
however, will be made only on coupon dates.
These securities
will be issued in the form of Bond to be held in the Bond Ledger Account (BLA)
and all the provisions of Government
Securities Act, 2006 shall be applicable.
The eligible investors for these bonds would include
individuals, Hindu Undivided Family (HUF), charitable institutions registered
under section 25 of the Indian Companies Act and Universities incorporated by
Central, State or Provincial Act or declared to be a university under section 3
of the University Grants Commission Act, 1956 (3 of 1956).
The eligible investors can approach three private sector banks —
HDFC Bank, ICICI Bank and Axis Bank — and Stock Holding Corporation of India.