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.