The auctions will be conducted using multiple price method by the Reserve Bank of India (RBI) , Mumbai Office.
Up to 5% of the notified amount of the sale of the stocks will be allotted to eligible individuals and institutions through Scheme for Non-Competitive Bidding Facility in the Auction of Government Securities.
What Are Floating Rate Bonds?
Bonds whose interest amount fluctuates in step with the market interest rates or some other external measure are called floating rate bonds.
Price of floating rate bonds remains relatively stable because neither a capital gain nor a capital loss occurs as market interest rates go up or down.
What are Government Stocks and Bonds?
These bonds are sold by a government to finance its budget deficit (the difference between what it gets in taxes and what it spends) .
Government bonds are usually considered to be a very safe form of investment
Bonds Offered by Government
The Government Securities are of the following types.
Dated Securities: Dated Securities have fixed maturity identified with the date of maturity. They have either fixed rate of interest or coupon rates which are semiannually payable.
Zero Coupon Bonds: Zero Coupon Bonds are issued at Face Value and redeemed at Par Value. They were issued during 1990s, but not now.
Floating Rate Bonds: These refer to the changing interest rate bonds discussed above.
Call⟋Put Option Bonds: The call and put option means that the bond holder can sell it back to the government and Government could buy it from the bond holder, after a prefixed period. First issued in 2002.
What is Price Based Auction?
A price based auction is conducted when Government of India re-issues securities issued earlier.
Bidders quote in terms of price per ₹ 100 of face value of the security (e. g. , ₹ 102.00, ₹ 101.00, ₹ 100.00, ₹ 99.00, etc. , per ₹ 100⟋-) .
Bids are arranged in descending order and the successful bidders are those who have bid at or above the cut-off price.