BANKER AND DEBT MANAGER TO GOVERNMENT

Managing the government's banking transactions is a key RBI role. Like individuals, businesses and banks, governments need a banker to carry out their financial transactions in an efficient and effective manner, including the raising of resources from the public.

Press Release


PDF document (244 kb)
Date : Apr 16, 2019
Conversion of Government of India (GoI)’s Securities

The Government of India announces the conversion of its securities through auction for an aggregate amount of ₹2,000 crore (face value). The security-wise details of the conversion are given as under:

Date of Auction Source Security Notified Amount of Source Security (FV) Destination Security
April 22, 2019 7.28% GS 2019 (maturing on June 03, 2019) ₹2,000.00 crore 7.26% GS 2029 (maturing on January 14, 2029)

The market participants are required to place their bids in e-kuber giving the amount of the source security and the price of the source and destination security expressed up to two decimal places.

The auction would be a multiple-price based auction, i.e. successful bids will get accepted at their respective quoted prices for the source and destination securities.

Bids for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system on April 22, 2019 (Monday) between 10.30 a.m. and 12.00 Noon. The result of the auctions will be announced on the same day and settlement will take place on April 23, 2019 (Tuesday).

Government of India reserves the right to:

  • Accept offers for less than the notified amount.

  • Purchase marginally higher than the notified amount due to rounding-off effect.

  • Accept or reject any or all the offers either wholly or partially without assigning any reason.

Operational guidelines for switch transactions and other details are given in the Annex.

Anirudha D. Jadhav
Assistant Manager

Press Release : 2018-2019/2470


Annex

Operational Guidelines for Switch/Conversion Transactions with the
Government of India

1. The market participants can bid in the switch auction through the Switch Transaction module provided in the e-kuber portal.

2. Bidding in the auction implies that the market participants agree to sell the source security/ies to the Government of India (GoI) and simultaneously agree to buy the destination security from the GoI at their respective quoted prices.

3. Each bid should specify the following details:

  1. Amount of the source security (Face Value) that the participants are willing to sell.

  2. Price of the source security (expressed up to two decimal places), at which the participants are willing to sell the source security.

  3. Choice of destination security and the Price of the destination security (expressed up to two decimal places), at which the participants are willing to buy the destination security.

4. Minimum bid size would be ₹10,000 and in multiples of ₹10,000 thereafter. The participants are allowed to submit multiple bids. However, the aggregate amount of bids submitted should not exceed the notified amount of source security in the auction.

5. The participants can choose to bid for any/all the destination security/ies, but the aggregate amount of bids for the source security should not exceed their holdings of the source security in face value terms.

6. The auction would be a multiple-price based auction, i.e. successful bids will get accepted at their respective quoted prices for the source and destination securities.

7. The auction cut-off would be decided for each distinct pair of source and destination securities separately, based on the switch ratio (which is the ratio of the price of the source security to the price of the destination security). The switch ratio would be rounded-off at 8 decimal places.

8. Successful bidders would be those who have placed their bids at or below the cut-off switch ratio. All bids higher than the cut-off switch ratio would be rejected.

9. There will be provision of pro-rata allotment should there be more than one successful bid at the cut-off switch ratio.

10. The amount of destination security to be issued for each successful bid will be computed by multiplying the allotted amount (FV) of the source security to the rounded-off switch ratio. The amount of destination security (FV) would be rounded-off to the nearest lower value in multiples of ₹10,000. Cash consideration would be computed, for the face value of the less securities transferred (due to rounding-off of the destination security Face Value), by adding the accrued interest to the clean price. The clean price would be calculated at the respective quoted bid price of the destination security for each bid.

11. The settlement of the auction would be held on T+1 basis.

12. Though the conversion would be broadly cash neutral, there will be fund settlement for the net accrued interest (accrued interest for the source security FV – accrued interest for the destination security FV) for each bid. Cash consideration (due to rounding-off of face value of destination security) computed for each bid would be added to the net accrued interest. Accordingly, fund settlement will be done for the final amount (Net accrued interest + cash consideration) for each bid.

Note: An illustration for the calculation of cash consideration due to rounding-off of destination security face value is as given below:

Amount of Source Security (FV in ₹) 10,00,00,000.00
Price of Source Security (₹) 97.50
Price of Destination Security (₹) 99.20
Switch Ratio (rounded-off at 8 decimals) 0.98286290

Destination Security FV before rounding off (₹ ) 9,82,86,290.00
Destination Security FV re-issued after rounding-off (₹) 9,82,80,000.00
FV of less securities transferred (₹) 6290.00
Clean Price (₹) 6240.00
Accrued interest on FV of less securities transferred (₹) 100.00
Cash settlement due to rounding off (₹) 6340.00

13. In case of technical difficulties, Core Banking Operations Team should be contacted (email; Phone nos: 022-27595591, 592 and 599). For other auction related difficulties, IDMD auction team can be contacted (email; Phone no: 022-22702431, 022-22705125).


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