Mumbai, Aug 01: Reserve Bank of India is to conduct an auction of Floating Rate Bonds (FRBs), 2011, for an aggregate amount of Rs 6,000 crore and a new 25-year stock of Rs 3,000 crore nominal amount on August 7. The FRBs would be of eight-year tenure and would be issued at par and there would no floor or cap on the interest rate on these bonds, RBI said in a release here today.

The bonds would carry an interest rate which would be calculated by adding a "spread" to a variable base rate. The "spread" would be decided in the auction and would remain unchanged during the currency of the bonds.
RBI said that FRBs are being issued by the Government of India on auction basis for the fifth time. The bonds provide hedge against interest rate risk, offering returns linked to short term yield.

Referring to the 25 year stock, the apex bank said it would be a yield-based auction using multiple price method.

The tenure of the new stock would notionally commence from March 25, 2003, and interest on the stock would be paid every half-year on September 25 and March 25, it said.
Upto five per cent of the notified amount of FRBs and the new stock would be allotted to eligible individuals and institutions as per the scheme for non-competitive bidding facility, it added.

Bureau Report