GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(Department of Economic Affairs)
(Budget Division)

New Delhi, the July 12, 2002

NOTIFICATION

Auction for Sale of Government Stock of 10 Years with Call and Put Options

F. No. 4(9)-W&M/2002: Government of India hereby notifies sale of Government Stock ("the Government Stock") of 10-Year tenure for an aggregate amount of Rs. 3,000 crore (nominal). The sale will be subject to the terms and conditions spelt out in this Notification (called ‘Specific Notification’) as also the terms and conditions specified in the General Notification F.No.4(9) –W&M /2000, dated 6th May, 2002 issued by the Government of India.

Method of Issue

2. The Government Stock will be sold through the Reserve Bank of India, Mumbai Office, Fort, Mumbai – 400 001 by yield based auction using "Uniform Price Auction" method as specified in paragraph 5.1 of the General Notification.

Call and Put Option

3. (i) The Government Stock will have the call and put options as specified in paragraph 7.5 of the General Notification.

(ii) The Government of India shall have the discretion to exercise "call option", after giving a public notice of two months, to prematurely redeem the Government Stock at Rs. 100 for every Rs. 100 (nominal), i.e., at par on or after completion of five years tenure from the date of issuance of the Government Stock on any coupon payment date falling thereafter. In that event, interest on the Government Stock shall cease to accrue on the redeemed Government Stock from the coupon payment date of premature redemption announced by the Government.

(iii) The holders of the Government Stock shall have the discretion to exercise "put option", after giving a notice of two months in the enclosed format of application (Annexure II), for premature redemption to Government at Rs. 100 for every Rs. 100 (nominal), i.e., at par on or after completion of five years tenure from the date of issuance of the Government Stock on any coupon payment date falling thereafter. In that event, interest shall cease to accrue on the redeemed Government Stock from the coupon payment date of premature redemption.

Allotment to Non-competitive Bidders

4. Government Stock up to 5 % of the notified amount of the sale will be allotted to eligible individuals and institutions as per the enclosed Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities (Annexure I).

Place and Date of Auction

5. The auction will be conducted by the Reserve Bank of India, Mumbai Office, Fort, Mumbai – 400 001 on July 17, 2002. The application form duly filled in with the bids should be submitted to the aforesaid Office on July 17, 2002, before the close of banking hours.

Tenure

6. The Government Stock will be of ten years tenure. The tenure of the Stock will commence from July 18, 2002. The Stock will be repaid at par on July 18, 2012 subject to the terms specified under paragraph 3 hereinabove.

Date of issue and payment for the Stock

7. The result of the auction shall be displayed by the Reserve Bank of India at its Fort, Mumbai Office on July 17, 2002. The payment by successful bidders will be on July 18, 2002, i.e., the date of issue.

Interest

8. The coupon rate for the securities will be set at the cut-off yield to maturity rate decided in the auction. The interest will be payable half-yearly on January 18 and July 18 on the amount outstanding or till the date of premature redemption in terms of paragraph 3 hereinabove.

 

By Order of the President of India

Sd/-

(D. Swarup)
Additional Secretary (Budget)

 

ANNEXURE I

Scheme for Non-competitive Bidding Facility in
the Auctions of Government Securities

I. Scope : With a view to encouraging wider participation and retail holding of Government securities it is proposed to allow participation on "non-competitive" basis in select auctions of dated Government of India securities. Accordingly, non-competitive bids up to 5 percent of the notified amount will be accepted in the auctions of dated securities. The reserved amount will be within the notified amount.

II. Eligibility: Participation on a non-competitive basis in the auctions of dated GOI securities will be open to investors who satisfy the following:

1. do not maintain current account (CA) or Subsidiary General Ledger (SGL) account with the Reserve Bank of India.

Exceptions: Regional Rural Banks (RRBs), Urban Cooperative Banks (UCBs) and Non-banking Financial Companies (NBFCs) shall be covered under this Scheme in view of their statutory obligations.

2. make a single bid for an amount not more than Rs.one crore (face value) per auction

1. submit their bid indirectly through any one bank or PD offering this scheme.

Exceptions: Regional Rural Banks (RRBs), Urban Cooperative Banks (UCBs) and Non-banking Financial Companies (NBFCs) shall be eligible to submit their non competitive bids directly.

III. Coverage: Subject to the conditions mentioned above, participation on "non-competitive" basis is open to any person including firms, companies, corporate bodies, institutions, provident funds, trusts, and any other entity as may be prescribed by RBI. The minimum amount for bidding will be Rs.10,000 (face value) and thereafter in multiples in Rs.10,000 as hitherto for dated stocks.

IV. Other Operational Guidelines:

1. It will not be mandatory for the retail investor to maintain a constituent subsidiary general ledger (CSGL) account with the bank or PD through whom they wish to participate. However, an investor can make only a single bid under this scheme. An undertaking to the effect that the investor is making only a single bid will have to be obtained and kept on record by the bank or PD.

2. Each bank or PD on the basis of firm orders submit a single customer bid for the aggregate amount on the day of the auction. Details of individual customers viz. name, amount, etc shall be provided as an Annexure to the bid.

3. Allotment under the non-competitive segment to the bank or PD will be at the weighted average rate of yield/price that will emerge in the auction on the basis of the competitive bidding. The securities will be issued to the bank or PD against payment on the date of issue irrespective of whether the bank or PD has received payment from their clients.

4. In case the aggregate amount of bid is more than the reserved amount (5% of notified amount), pro rata allotment would be made. In case of partial allotments, it will be the responsibility of the bank or PD to appropriately allocate securities to their clients in a transparent manner.

5. In case the aggregate amount of bids is less than the reserved amount, the shortfall will be taken to competitive portion.

6. Security would be issued only in SGL form by RBI. RBI would credit either the main SGL account or the CSGL account of the bank or PD as indicated by them. The facility for affording credit to the main SGL account is for the sole purpose of servicing investors who are not their constituents. Therefore, the bank or PD would have to indicate clearly at the time of tendering the non-competitive bids the amounts (face value) to be credited to their SGL account and the CSGL account. Delivery in physical form from the main SGL account is permissible at the instance of the investor subsequently.

7. It will be the responsibility of the bank or the PD to pass on the securities to their clients. Except in extraordinary circumstances, the transfer of securities to the clients shall be completed within five working days from the date of issue.

8. The bank or PD can recover upto six paise per Rs.100 as brokerage/commission/ service charges for rendering this service to their clients. Such costs may be built into the sale price or recovered separately from the clients. In case the transfer of securities is effected subsequent to the issue date of the security, the consideration amount payable by the client to the bank or PD would also include accrued interest from the date of issue.

9. Modalities for obtaining payment from clients towards cost of the securities, accrued interest wherever applicable and brokerage/commission/service charges may be worked out by the bank or PD as per agreement with the client. It may be noted that no other costs such as funding costs should be built into the price or recovered from the client.

V. Banks and PDs will be required to furnish information relating to operations under the Scheme to the Reserve Bank of India (Bank) as may be called for from time to time within the time frame prescribed by the Bank.

VI. The aforesaid guidelines are subject to review by the Bank and accordingly, if and when considered necessary, the Scheme will be modified.

 

ANNEXURE II

Date:              

To

The Chief General Manager
Public Debt Office
Reserve Bank of India
Ahmedabad*/Bangalore*/Bhubneswar*/Mumbai*/Kolkata*/Guwahati*/Hyderabad*/Jaipur*/Kanpur*/Chennai*
Nagpur*/NewDelhi*/Patna*/Thiruvananthapuram*

Dear Sir,

_____ per cent Government Stock 2012

In terms of par 3(ii) of Government of India, Ministry of Finance, Notification F. No. __________ dated __________ 2002 I/we _______________ hereby exercise the option and offer for premature redemption ____per cent Government Stock 2012 on my behalf ^(1)*/on behalf of my clients^(2)* to the Government of India for an aggregate face value of Rs._______________at par .

_______________________________________________________________________________________________

*(1)The stock is held by me/us in the following form:

(a)*SGL Account No______________at Public Debt Office____________________.

(b)* Stock certificate No._________________( Duly Discharged certificate/s enclosed).

(2)The stock is held in the following form:

*CSGL Account No.________________at Public Debt Office___________________

_______________________________________________________________________________________________

Accordingly, I / we request you to * debit my SGL/CSGL Account and credit my Current Account No.**_______________with Reserve Bank of India __________or pay me/us by way of cheque for the par value of the stock tendered and half yearly interest payable on the Stock from the last coupon date.

Yours faithfully,

Signature :

Name :

Designation* :

Office Stamp / Seal* :

_______________________________________________________________________________________________

*Strike out whichever is not applicable
** Applicable for persons having Current Account with Reserve Bank of India

Note: Separate application for SGL and CSGL should be submitted.