RBI: Inflation linked bonds for sale from December 23, 2013
December 22, 2013
The Reserve Bank of India (RBI) will issue Inflation Indexed National Savings Securities Cumulative (IINSS-C) bonds(or inflation linked bonds)for retail investors by opening the subscription on December 23, 2013 and close it on December 31, 2013.
Objective: The move will help to protect retail investors from price rise.
The IINSS-C bonds will offer investors a return i.e. 1.5% more than inflation based on the consumer price index. Interest will be compounded half yearly, enhancing effective yield on investments.
Inflation linked bonds
The limit for investment per applicant per annum: Rs 5,000 – Rs 5 lakh.
The interest rate on these bonds would be linked to the Consumer Price Index (CPI).
The interest rate would comprise two parts — a fixed rate of 1.5% per annum and inflation rate based on CPI with a lag of three months. It would be compounded on the principal on half-yearly basis and paid at the time of maturity.
For senior citizens (65 years and above of age), early repurchase will be allowed after one year from date of issue and other investors can redeem them after three years but with penalty of 50 per cent of the last coupon paid.