The Reserve Bank of India (RBI) on July 20, 2023 announced the sale (issue and/or re-issue) of three government securities (G-secs). The auctions for these G-secs are scheduled for July 21, 2023.
The three G-secs scheduled for auctions are ‘7.17% GS 2030’ worth Rs. 7,000 crore, ‘New GS 2037’ worth Rs. 12,000 crore and ‘7.25% GS 2063’ for a notified amount of Rs. 12,000 crore.
Successful bidders will need to make the payment on July 24, 2023.
The 7.17% GS 2030 will offer an annualised interest rate of 7.17 per cent with maturity set at 2030.
“Up to 5 per cent of the notified amount of the sale of the securities will be allotted to eligible individuals and institutions as per the ‘scheme for non-competitive bidding facility in the auction of government securities’,” the release said.
Both competitive and non-competitive bids for the auction should be submitted in electronic format on the RBI Core Banking Solution (E-Kuber) system on July 21, 2023.
The non-competitive bids should be submitted between 10:30 a.m. and 11:00 a.m. and the competitive bids should be submitted between 10:30 a.m. and 11:30 a.m, the release added.
Government Bonds
Government securities, also known as government bonds, are considered safe investment instruments that offer relatively higher interest rates and longer tenures compared to bank fixed deposits.
For instance, a government bond issued in February 2023, maturing in 2029, offered a 7.10 percent interest rate, surpassing typical bank fixed deposit rates for a similar term.
However, government bonds may have lower interest rates than riskier investment options, such as corporate bonds or stocks. Additionally, they may not be as liquid as other investments, with maturities typically exceeding seven years. Yet, government securities can be traded in the secondary market, which may involve risks due to fluctuating bond prices.
RBI also announced the minimum underwriting commitment (MUC) applicable to each primary dealer (PD). PDs are financial firms appointed as specialist intermediaries in the government securities market, who acquire any unsubscribed portion of a primary issuance of a security.
Investors and market participants will closely observe the outcome of the auctions as it can influence bond yields and the overall market liquidity.
