The Reserve Bank of India and the Government will in a month’s time firm up the guidelines and features for inflation-indexed bonds, a top official of the central bank said here on Thursday.
“We are still in the process of finalising the features. One or two design issues are yet to be sorted out between us and the Government,” H. R. Khan, RBI Deputy Governor, told newspersons on the sidelines of an international conference on ‘Housing: An engine for inclusive growth’, organised by Asia-Pacific Union for Housing Finance and National Housing Bank.
Currently, the thinking is it will be issued like any other government security.
The bonds will be linked to the wholesale price index and indexation will happen every six months. The maturity period is likely to be in the range of 7-15 years, Khan said.
G-Sec window
The bonds are likely to be made available under the window provided for auction of government securities. The only difference is it will form part of allocation for non-competitive bidding.
“What we are proposing is that in non-competitive portion we have higher percentage of bidding, say, 10 per cent or even 15 or 20 per cent for inflation-indexed bonds.
“So it will be earmarked for small entities, individuals or trusts. It has to be bid for,” Khan said.
A common man can also buy these bonds through primary dealers.
After a few months, the RBI will look at introducing some certificates (National Savings Certificates, for instance) for such inflation indexation, he said.
ECB window
The RBI, Khan said, will continue providing a dedicated external commercial borrowing (ECB) window for ‘affordable housing’ even in current fiscal. “The $1 billion ECB window for affordable housing will be continued this year as well.”
Khan also made it clear there was no proposal to increase the ECB limit for affordable housing from the current $1 billion.
He said that the $1 billion ECB window was put in place in latter part of last year and was, therefore, not utilised.
“There are small issues that are being sorted out and this year we will see to it that it is being utilised,” Khan said.
Due diligence needed
Earlier in his address at the international conference, Khan said caution has to be exercised in allowing ECB for affordable housing as housing does not generate foreign exchange.
“Proper due diligence has to be done to ensure that we don't get into any difficulty. We have to balance the requirement as well as the currency mismatches. We have to take a balanced approach,” he said.
Later Khan told newspersons that all applications will be routed through the National Housing Bank which will scan the applications and see to that only genuine players get access to this window.