RBI extends G-Secs bidding to retail investors

Our Banking Bureau

Mumbai, Dec 9: With a view to encouraging wider participation and retail holding of government securities (G-Secs), the Reserve Bank of India (RBI) announced the availability of non-competitive bidding facility in G-Secs for retail investors.

The RBI proposed to allow participation on non-competitive basis in select auctions of dated G-Secs. Accordingly, non-competitive bids up to 5 per cent of the notified amount will be accepted in the auctions of dated securities. The reserved amount will be within the notified amount.

In a circular addressed to all market participants, the RBI stated that participation on a non-competitive basis in G-Secs auctions will be open to investors who do not maintain current account or subsidiary general ledger account with the RBI and who can make a single bid for an amount not more than Rs 1 crore of face value per auction.

In other words, participation on a non-competitive basis is open to any person including individuals, firms, companies, corporate bodies, institutions, provident funds, trusts and any other entity prescribed by the RBI.

Regional rural banks, urban cooperative banks and non-banking financial companies (NBFCs) will also be able to participate on non-competitive basis as an exception in view of their statutory obligations.

The facility to put in non-competitive bids will be available to retail investors through banks and primary dealers (PD). The retail investors will be allowed to bid through a bank or a primary dealer in the auctions of dated G-Secs notified from time to time.

The minimum amount of bidding will be Rs 10,000 (face value) and thereafter, in multiples of Rs 10,000. All retail investors taken together will be allocated securities under this facility up to a maximum of 5 per cent of the notified amount. The amounts allocated to non-competitive bidders will be within the notified amount. The allocation on a non-competitive basis will be done at the weighted average rate that will emerge in the auction on the basis of competitive bidding.

The RBI stated that 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. Each bank or PD on the basis of firm orders will submit a single customer bid for the aggregate amount on the day of the auction.