Inflation Indexed Bonds will be open for investment

Inflation Indexed Bonds will be open for investment from 4th June 
 

The first tranche of the IIBs-2013-14 for Rs1,000-Rs2,000 crore will be issued on 4th June, and the maturity period of these bonds will be 10 years

The Reserve Bank of India (RBI) today announced it will launch inflation-linked bonds every month, starting 4th June, to attract household savings of up to Rs 15,000 crore this fiscal so as to discourage investments in gold.

“RBI, in consultation with the Government of India, has decided to launch Inflation indexed Bonds (IIBs),” the central bank said in statement.

The first tranche of the IIBs-2013-14 for Rs1,000-Rs2,000 crore will be issued on 4th June, it said, adding that the maturity period of these bonds will be 10 years. The total issue size will be Rs12,000-Rs15,000 crore in 2013-14.

After the first tranche, bonds will be issued on last Tuesday of every month.

While the first series of the bonds will be open for all class of investors, the second series issue—beginning October—will be reserved exclusively for retail investors.

RBI said the bonds are pursuant to the Budget proposal to “introduce instruments that will protect savings of poor and middle classes from inflation and incentives household sector to save in financial instruments rather than buy gold”.

Both the government as well as the RBI are concerned over the rising gold imports as its putting pressure on current account deficit (CAD), which widened to historic high of 6.7% in third quarter of 2012-13.

Gold and silver imports last month shot up 138%, year-on-year, to $7.5 billion.

Announcement of the bonds to discourage investments in gold is the second major move by RBI in the last three days. On Monday, it had placed restrictions on banks to import gold.