These securities are being 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, finance ministry said in a statement on Monday.
It said that the distribution and sale of these instruments would be through banks and the interest rate on these securities would be linked to final combined CPI (Base: 2010=100).
Interest rate would comprise two parts fixed rate (1.5% per annum) 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, it said.
Early redemption will be allowed after one year from date of issue for senior citizens and 3 years for all others, subject to penalty charges at the rate of 50% of the last coupon payable for early redemption. Early redemption, however, can be made only on coupon dates, it added.