The Finance Ministry on Monday announced the sale of the next tranche of inflation indexed bonds to the tune of Rs 1,000 crore.

The Reserve Bank of India (RBI) will conduct the auction on Tuesday.

This auction was earlier planned for the first week of July, but now advanced by the Government. About 20 per cent will be reserved for retail investors.

The first tranche of Inflation Indexed Bonds (IIBs) for Rs 1,000 crore was sold on June 4.

The Government plans to raise Rs 12,000-15,000 crore through inflation indexed bonds in the first half of 2013-14.

The Centre is now looking to have more frequent auctions so that it can arrive at better benchmarking for retail investors.

As against earlier planned monthly intervals for sale of inflation indexed bonds, the Finance Ministry is now likely to do it on a fortnight basis.

Post-September this year, plans are afoot to issue such bonds solely for retail investors.

IIBs are being seen as an effective addition to Indian authorities’ policy tool kit for addressing macroeconomic imbalances.

Such bonds could help correct the macroeconomic imbalances caused by domestic investors’ widespread use of gold as an inflation hedge, international rating agency Moody’s Investors Service had said recently.

But the credit effect is only expected to be incremental and gradual as the additional Rs 12,000-Rs 15,000 crore of planned inflation indexed bonds issuance equals only 2 per cent of Government debt issued this year.

(This article was published on June 24, 2013)
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